VIAC vs Finpension 3a – Which is the best third pillar for 2021?

VIAC

VIAC started in 2018 as the first mobile third pillar. When it started, it was only mobile and started a small revolution in the third pillar world. There are now several mobile alternatives. And now, VIAC also offers a web application.

VIAC has two great advantages:

• You can invest up to 97% in stocks. They were the first ones to offer this allocation to stocks.
• The fees are relatively low, at 0.51% per year. For Swiss third pillars, this is as low as it gets.

On top of that, VIAC is a very transparent and honest company with clear communication.

All these advantages made it the best third pillar when they started. And they now have more than 15’000 customers.

For more information, you can read my review of VIAC.

Finpension 3a

Finpension 3a is the newest challenger in the third pillar world. They started in October 2020. But they are not a new company. Finpension is already behind valuepension – the best vested benefits account there is in Switzerland.

Finpension 3a also started as a mobile-only third pillar. But they added web support only a few months after they started.

So what makes Finpension 3a so interesting?

1. You can invest up to 99% in stocks!
2. The fees are very low, at 0.42% per year.
3. You have large freedom in your portfolio.

So, while they are new to the third pillar world, they are already exciting. And they have great experience managing vested benefits accounts.

For more information, you can read my review of Finpension 3a.

Investing Strategies

Let’s start by comparing the investing strategies of VIAC vs Finpension 3a.

Both third pillars invest in mutual funds. They do not use ETFs because pension companies have access to much better funds than private investors. Therefore, they have access to funds with close to zero (or even zero) TER. So, it is an excellent reason to invest in mutual funds instead of ETFs.

And both companies invest in passive mutual funds. These funds are all index funds that minimize the costs and try to replicate the market’s performance. Once again, it is a great thing.

Both companies let you invest heavily in stocks. You can invest up to 97% in stocks with VIAC. But Finpension 3a will let you invest up to 99% in stocks. This may not seem like a big difference, but it is still significant when we talk about 30 years of investing term. So, Finpension 3a is better than VIAC for stocks.

Both companies differ quite heavily in what they do with the money that is not invested in stocks. At VIAC, the money that is not invested in stocks will be kept in cash. At Finpension, only 1% is kept in cash. The rest of the money not invested in cash is invested in bonds.

The issue is that Swiss bonds are currently not great. They are yielding a negative interest. Therefore, cash has more return than bonds currently. But this could well change in the future. So, if you do not plan to invest heavily in stocks, VIAC may be a better fit for you.

Overall, both third pillar providers have a great investing strategy! But Finpension 3a is slightly better for stocks investor like me.

Custom Strategies

It is always good to look at what advanced investors can do with custom strategies. So, let’s compare VIAC vs FInpension 3a on that point.

Both third pillars let you choose a custom strategy.

With VIAC, there are some limits to what you can do with a custom strategy:

• They will only let you invest up to 60% in foreign currencies.
• You will only be able to invest up to 90% in Swiss Stocks.
• VIAC will prevent you from having too much in a single company (this impacts only the SMI)
• They will prevent from having more than 20% in Emerging Markets.

Most of these limitations are not that bad. I wish the first limitation was relaxed. All the other limitations make total sense, and I would not want to overcome them. But having to have 40% of CHF in my portfolio will limit my diversification.

With Finpension 3a, you also have some limits:

• Maximum of 20% in precious metals
• Maximum of 50% in Real Estate

And that is about it for the limits. It means you can have 99% in foreign currencies (1% needs to stay in cash). And you can have 99% in a single  World fund, for instance.

And you can even optimize for having 0% TER:

So, Finpension 3a is significantly more flexible regarding custom investing strategies than VIAC. You will be able to boost your international diversification higher. But, VIAC still offers great custom strategies.

Fees

In the long-term, it is essential to consider the investing fees. You are going to pay these fees for a very long time. And you are going to pay regardless of the market conditions. So, we need to compare the fees of VIAC vs Finpension 3a.

Let’s start with VIAC. The fees will depend on which strategy you are using. If you are using the standard Global 100 portfolio (97% in stocks, globally diversified), you will pay 0.51% in fees per year.

On top of that, you pay fees for currency conversion. This fee is 0.75% per conversion. However, this is optimized by netting conversions together. VIAC estimates the annual average to be 0.05%. It is difficult to say if this is accurate or not. I would think it is likely to be slightly higher.

Finally, there are also some subscription and redemption fees in the index funds used by VIAC. I would think that this is almost negligible in the long-term since you only buy and sell once. So, let’s ignore them for now.

This gives a total fee of about 0.56% per year for a fully-invested and well-diversified portfolio at VIAC.

Let’s take a look at Finpension 3a now. The base fee is 0.39% per year. But this base fee is without VAT. So, the real base yearly fee is 0.42% per year.

On top of that, you will pay some extra fees based on each portfolio. The default Equity 100 portfolio will cost you 0.02% per year. But if you use a custom portfolio, you can get that down to 0%!

Finally, there are also some subscription and redemption fees with the funds, just like for VIAC. In fact, they are mostly using the same funds. The foreign exchange fee is 0.05%. With netting, this will be negligible on average.

This gives us a total fee of about 0.44% for Finpension 3a, for an excellent portfolio.

When we compare VIAC vs Finpension 3a, Finpension 3a is significantly cheaper than VIAC. You may think that this is not a significant difference, but a 0.44% fee is 20% cheaper than a 0.56% fee!

If you have 100’000 on CHF in your third pillar, you will save 120 CHF per year with Finpension 3a.

In the previous section, I mentioned that VIAC lets you hold cash. When you do that, you do not pay fees on the cash portion. So, a 100% cash portfolio at VIAC would be free of fees. And with 40% cash, you would only pay 60% of the normal fees. At Finpension, you are always fully invested. Therefore, you will pay more fees at Finpension 3a for a low allocation to stocks.

Extra features – Insurance

We can also take a look at the extra features that these two great services offer. It is actually pretty simple since only VIAC has an extra feature, and it is the only one.

Indeed, VIAC started offering life or disability insurance in their package. For each 10’000 CHF invested in securities, you will get free protection of 2500 CHF. You have to choose yourself if you want life or disability insurance. You cannot choose both.

Let’s try to quantify the value of such insurance. In Switzerland, men have a 6% chance to die before retirement, as of 2021. If you have 100’000 CHF invested in your portfolio, you get 25’000 CHF insurance. Based on the probability of dying before retirement, we can put a value of 1500 CHF for your investments’ entire duration.

If you invest for 30 years, you will get a life insurance value of:

• 50 CHF per year if you invest 100’000 CHF in your third pillar
• 100 CHF per year if you invest 200’0000 CHF in your third pillar
• 200 CHF per year if you invest 400’000 CHF in your third pillar

For disability, about 2% of people in Switzerland are concerned by the disability insurance, as of 2021. So, we will take 2% as the probability of being disabled.

If you invest for 30 years, you will get a life insurance value of:

• 16.66 CHF per year if you invest 100’000 CHF in your third pillar
• 33.33 CHF per year if you invest 200’0000 CHF in your third pillar
• 66.66 CHF per year if you invest 400’000 CHF in your third pillar

These are only rough estimates. But you need a large amount of money invested for this insurance to be interesting. And even then, the amounts are relatively low. I prefer paying lower fees and be optimistic. But, for people that are already customers of VIAC, it is an interesting, although minimal, advantage.

Security

Let’s compare the security of VIAC vs Finpension 3a.

Both applications are technically secure, and both companies have a strong record for security. I have not heard of any leaks or breaches in either of these two companies.

Neither of the applications requires a second factor of authentication. Indeed, you cannot do much from these two applications since the money is blocked until you can use it. Nevertheless, there is plenty of important information, and I would really prefer a second authentication factor.

Now, there is a big difference in the registration process. VIAC will ask you to authenticate your identity during the registration process. But Finpension 3a will wait until you need the money to ask for your identification. I prefer the approach of VIAC here since it could lead to issues when you want to withdraw money.

From a safety point of view, both third pillars are equivalent. VIAC and Finpension 3a manage the assets, but they are held in a pension foundation’s balance sheets. And the assets are saved in a custody bank in both cases. So, in cases of VIAC or Finpension 3a going bankrupt, the foundation would have to find a new manager.

Overall, I feel like the security of both third pillars is acceptable. But VIAC has a slight advantage given that they identify all their users.

Reputation

Finally, let’s look at the reputation of VIAC vs Finpesion 3a.

Both companies are very young, and it is difficult to find a lot of reviews about them. I have never heard any public bad news about either of them. And both companies seem to have an excellent reputation.

VIAC has 82 reviews on Google and got an average score of 5 stars out of 5 stars. It is a really impressive score. There are only two reviews with less than 5 stars, and none of them are pointing out a real issue. Now, most reviews are advertising codes for their referral programs. So, I would probably not pay attention to most of these reviews.

On the App Store, VIAC got 152 notes and an average score of 4.7 out of 5 stars. On the Play Store, VIAC got 239 reviews for an average score of 4.8 out of 5.

Finpension 3a has no reviews on Google. They have 10 reviews on the Play Store with an average score of 5 out of 5.  And they have no reviews on the App Store.

Both companies have the same good reputation. But VIAC’s reputation is a bit more proven since they have been in the game for two years. So, if you want to err on the side of caution, VIAC seems a little more solid. But Finpension has been managing second pillars for a while now, so they are not brand new either.

Applications

Personally, I do not really care about the applications, especially for the third pillar. It is really not important because you use it very rarely and you have to do very little with it.

But some people make this very important. Personally, I would much rather invest in a terrible app (with good security!) and low fees than in a beautiful app with higher fees. But it is up to you to decide what you want to prioritize. So, let’s compare VIAC vs Finpension 3a in terms of applications.

VIAC offers a mobile application and a web application. And I feel like both applications are quite good. They look good and are very easy to use. I think that they did a great job of polishing the applications.

Finpension 3a is also available as a mobile application and a web application. The mobile application could profit from some extra polishing. VIAC is a little better.

On the criteria of applications, VIAC is slightly better than Finpension 3a. Their mobile application feels a little better, but nothing really significant.

Summary – VIAC vs Finpension 3a

We can draw a table summary of our findings:

We can draw a few conclusions from this summary:

• Finpension 3a is better for aggressive investors
• Better expected returns in the long-term with Finpension 3a
• VIAC is better for conservative investors (less than 97% in stocks)
• VIAC applications are a little more polished than Finpension 3a
• VIAC offers life or disability insurance coverage

VIAC vs Finpension 3a – Conclusion

We are now done comparing VIAC vs Finpension 3a. The first important to note is that both are great third pillars. They are definitely the two best third pillars available in Switzerland.

But we have to choose a better one! And Finpension 3a has a lot of advantages over VIAC for long-term investing! Being able to invest 99% in stocks is really good. And reducing the fees by almost 20% is a great thing as well.

Adding to that the fact that custom strategies can take the fees even lower and push the foreign exposure to a maximum, I think Finpension is an excellent third pillar!

In 2021, I contributed to Finpension instead of contributing to VIAC. Given my long-term horizon and my aggressive investing, it is the better fit for me. And I think it is the better option for most people that will retire in the distant future. For one year, I will keep my VIAC accounts, and I will see if there are some future changes to either of these services. If finpension is still the best in 2022, I will move the remaining money from VIAC to finpension.

The only time VIAC would be better is for more conservative people. If you do not want to invest fully in stocks, VIAC may be better. Indeed, the fees will be slightly lower (especially if you go lower than 80%).

Which of VIAC vs Finpension 3a do you think is the best? Which third pillar provider are you using?