Finding the best pillar 3a investment funds in Switzerland
Pillar 3a investment funds offer significantly higher long-term return potential compared to savings accounts by investing your contributions in stocks, bonds, and other assets. For investors with 10+ years until retirement, these funds represent the mathematically optimal choice for building wealth within the tax-advantaged pillar 3a framework.
The difference between choosing the right and wrong investment fund compounds dramatically over decades. A fund charging 1.2% TER versus one charging 0.39% costs you roughly CHF 80,000 over 30 years on typical contributions. That is money taken directly from your retirement, not market returns you failed to earn.
How pillar 3a investment funds work
3a investment funds pool your contributions with other investors to purchase diversified portfolios of securities. Your money buys shares in the fund, which owns underlying assets like stocks, bonds, real estate, and sometimes alternative investments.
Key mechanics of 3a investment funds:
- Diversification: Your money spreads across hundreds or thousands of securities
- Professional management: Fund managers or algorithms handle all trading decisions
- Daily valuation: Fund shares have prices calculated each trading day
- Reinvestment: Dividends and interest automatically reinvest into the fund
- Tax efficiency: No capital gains taxes on trades within the 3a wrapper
The Swiss Federal Social Insurance Office (BSV/OFAS) regulates pillar 3a products, ensuring all investment funds meet specific requirements for diversification and risk management.
Active vs passive investment funds
This distinction matters more than most other factors. It affects both your costs and likely returns.
Passive index funds
Passive funds track market indices like the MSCI World or SPI without trying to beat them. They buy and hold the same securities in the same proportions as their benchmark index.
Advantages of passive funds:
- Lower fees (TER typically 0.39% to 0.55%)
- Consistent performance relative to benchmark
- No manager risk (underperforming due to bad decisions)
- Transparent, predictable strategy
- Supported by decades of academic research
Active funds
Active funds employ managers who try to outperform markets through security selection and timing decisions.
Characteristics of active funds:
- Higher fees (TER typically 0.80% to 1.50%)
- Potential to outperform or underperform benchmarks
- Manager skill (or luck) determines relative results
- Less predictable outcomes
The evidence is clear: over 10-15 year periods, 80-90% of actively managed funds underperform their benchmark indices after fees. The few that outperform are nearly impossible to identify in advance. This is why most evidence-based investors, including myself, prefer passive index funds for long-term retirement investing.
Understanding Total Expense Ratio (TER)
TER represents the annual cost of owning an investment fund, expressed as a percentage of assets. It includes management fees, custody costs, administrative expenses, and transaction costs within the fund.
Current TER ranges for pillar 3a funds (2025):
- Low-cost digital providers: 0.39% to 0.49% (Finpension, VIAC)
- Mid-range providers: 0.50% to 0.75% (frankly, some banks)
- Traditional banks and insurers: 0.80% to 1.50%
Why TER matters enormously:
On CHF 7,056 annual contributions over 30 years with 5% average returns:
- At 0.39% TER: Final value approximately CHF 470,000
- At 1.20% TER: Final value approximately CHF 390,000
- Difference: CHF 80,000 lost to fees
This is not hypothetical. These are the real costs of choosing expensive funds. Every 0.1% in fees compounds against you every year for decades.
Equity allocation and risk profiles
Investment funds offer different stock allocation levels ranging from 0% to 99%, determining both expected returns and volatility.
Conservative funds (0-35% stocks)
Suitable for investors within 5-10 years of retirement or those with low risk tolerance. These funds prioritize capital preservation with modest growth potential. Expected long-term returns: 2-4% annually.
Balanced funds (35-65% stocks)
Middle ground between growth and stability. Popular for investors uncertain about their risk tolerance or those wanting moderate exposure. Expected long-term returns: 4-5% annually.
Growth funds (65-85% stocks)
Higher growth potential for investors with 15+ year horizons who can tolerate significant short-term volatility. Expected long-term returns: 5-7% annually.
Maximum equity funds (85-99% stocks)
Highest expected returns for young investors with 25+ years until retirement. These funds experience substantial drawdowns during market crashes but historically deliver the best long-term performance. Expected long-term returns: 6-8% annually.
My approach: With over 20 years until retirement, I allocate my 3a contributions to maximum equity funds. Short-term volatility is irrelevant when I cannot access the money for decades anyway. The math clearly favors accepting this volatility in exchange for higher expected returns.
Key factors for comparing 3a investment funds
Performance track record
Historical performance does not guarantee future results, but 3-5 year track records help evaluate fund quality and strategy consistency.
What to look for in performance data:
- Comparison against appropriate benchmark indices
- Net returns after all fees (not gross returns)
- Consistency across different market conditions
- Tracking error for passive funds (how closely they follow their index)
Be skeptical of short-term outperformance. One good year means little. Look for funds that consistently match their benchmarks (for passive) or have logical explanations for any outperformance (for active).
Provider features and flexibility
Beyond costs and performance, consider:
- Equity allocation options: Can you choose 99% stocks or are you limited to 80%?
- Sustainable/ESG options: Available if environmental factors matter to you
- Currency hedging: Some funds hedge foreign currency exposure (adds cost)
- Rebalancing approach: Automatic or manual portfolio adjustments
- Digital experience: Mobile app quality and ease of contributions
- Multiple accounts: Support for opening several accounts (important for withdrawal planning)
Provider stability
Your pillar 3a relationship spans decades. Consider:
- Financial backing of the provider
- Years operating pillar 3a products
- Regulatory compliance and FINMA supervision
- Client assets under management
- Service quality and support
Newer digital providers like Finpension and VIAC have shorter track records but strong institutional backing and regulatory oversight. Traditional banks offer longer histories but typically charge significantly more.
Investment funds vs savings accounts
For long-term investors, the choice is mathematically clear but emotionally difficult for some.
Choose investment funds if:
- You have 10+ years until retirement
- You understand that short-term losses are normal and temporary
- You want your money working at its maximum potential
- You can avoid checking your balance obsessively during market downturns
Consider savings accounts if:
- You are within 5-10 years of retirement
- Market volatility causes you genuine distress
- You might panic and sell during downturns (this destroys returns)
For conservative alternatives, explore our pillar 3a savings account comparison. Many investors split their 3a between both product types.
Common mistakes with 3a investment funds
Mistake 1: Choosing your bank's fund by default
Traditional banks charge 2-3x more than specialized digital providers for essentially similar passive index exposure. Convenience is not worth CHF 50,000+ over your lifetime. Opening an account with a low-cost provider takes 15 minutes.
Mistake 2: Selecting low equity allocation when young
A 25-year-old choosing a "balanced" 50% equity fund instead of 99% equity sacrifices massive long-term returns. With 35+ years until retirement, short-term volatility is completely irrelevant. Higher equity allocation is mathematically optimal for long horizons.
Mistake 3: Trying to time the market
Some investors wait for "better entry points" or sell during downturns planning to rebuy lower. This almost never works. Time in the market beats timing the market. Contribute consistently regardless of market conditions.
Mistake 4: Ignoring fees because of past performance
A fund that returned 12% last year while charging 1.2% TER is not better than one returning 11% while charging 0.4%. Past performance rarely persists, but fees persist forever. Focus on what you can control: costs.
Mistake 5: Not opening multiple accounts
Swiss tax law taxes pillar 3a withdrawals separately but progressively. Withdrawing from smaller accounts over multiple years means lower taxes on each withdrawal. Open 3-5 accounts during your career, then withdraw one per year at retirement.
Choosing the right equity allocation for your age
General guidelines by years until retirement:
- 25+ years: 95-99% equities
- 20-25 years: 85-95% equities
- 15-20 years: 75-85% equities
- 10-15 years: 60-75% equities
- 5-10 years: 40-60% equities
- Under 5 years: Consider shifting to savings accounts
These are starting points, not rules. Your personal risk tolerance, other assets, and financial situation matter. Someone with a stable government job and paid-off house might accept more risk than someone self-employed with variable income.
Most low-cost providers allow you to adjust your equity allocation over time as you approach retirement. Start aggressive, gradually reduce risk.
Global diversification in 3a funds
Quality pillar 3a funds invest globally, not just in Swiss stocks. The Swiss market represents less than 3% of global market capitalization. Concentrating in Switzerland means missing most of the world's growth opportunities.
Typical allocation in diversified 3a equity funds:
- 50-60% developed markets (US, Europe, Japan)
- 5-15% emerging markets
- 10-20% Switzerland (home bias)
- Remainder in smaller markets
Currency exposure to USD and EUR is a natural consequence of global diversification. Some providers offer hedged versions, but hedging adds costs and reduces long-term returns. For multi-decade horizons, currency fluctuations average out.
My approach to pillar 3a investing
After analyzing dozens of options and managing my own 3a for years, here is what I actually do:
- Maximum equity allocation (99% stocks) because my time horizon exceeds 20 years
- Lowest-cost passive funds with TER under 0.45%
- Global diversification with minimal home bias
- Multiple accounts (currently three, planning for five by retirement)
- Automatic monthly contributions set up right after opening each account
- Never checking balances during market downturns
This approach is not exciting. There is no clever strategy or special insight. It simply applies well-established principles: minimize costs, maximize time in market, diversify globally, and avoid emotional decisions.
The Federal Tax Administration (ESTV/AFC) publishes detailed guidance on pillar 3a taxation that informed my withdrawal strategy planning.
How we evaluate 3a investment funds
Our comparison methodology focuses on factors that directly impact your long-term returns:
Cost analysis
We calculate total costs including TER, account fees, and any hidden charges. All-in cost comparison reveals true expense differences between providers.
Performance assessment
We track net returns after fees against appropriate benchmarks, evaluating both absolute and risk-adjusted performance across market cycles.
Strategy evaluation
We assess investment philosophy, index selection for passive funds, and consistency of approach for all fund types.
Provider review
We evaluate financial stability, regulatory compliance, digital experience, and customer service quality.
For the broader context of all pillar 3a options, see our complete pillar 3a comparison.
Frequently asked questions
What is the best pillar 3a investment fund in Switzerland?
The best pillar 3a investment fund combines low fees (under 0.45% TER), high equity allocation for long-term investors, global diversification, and a reliable provider. Leading options include Finpension and VIAC for their combination of low costs and quality passive index strategies. Compare current offerings in our comparison table above.
What are typical fees for 3a investment funds?
Pillar 3a investment fund fees range from 0.39% to 1.50% TER annually. Low-cost digital providers charge 0.39% to 0.49%. Traditional banks typically charge 0.80% to 1.50%. Over 30 years, the difference between low and high fees can exceed CHF 80,000 on standard contributions.
Should I choose active or passive 3a funds?
Choose passive index funds for pillar 3a investing. Research consistently shows 80-90% of active funds underperform their benchmarks after fees over 10-15 year periods. Passive funds offer lower costs, more predictable results, and better long-term performance for most investors.
What equity allocation should I choose?
Choose equity allocation based on years until retirement. With 20+ years, consider 85-99% stocks. With 10-20 years, 60-85% is reasonable. Under 10 years, consider reducing to 40-60% or switching partially to savings accounts. Higher equity means more volatility but better expected long-term returns.
Can I switch between 3a investment funds?
Yes, most providers allow switching between funds without fees or tax consequences. You can change your equity allocation as you age or if your risk tolerance changes. Switching providers requires transferring your account, which typically takes 2-4 weeks and should be free.
How do 3a investment funds compare to savings accounts?
Investment funds historically return 4-7% annually long-term versus 0.5-1.5% for savings accounts. Over 30 years, this difference compounds to hundreds of thousands of francs. However, investment funds carry short-term volatility risk that savings accounts do not. Choose funds for long horizons, savings for shorter periods or low risk tolerance.
What is TER and why does it matter?
TER (Total Expense Ratio) is the annual cost of owning an investment fund, expressed as a percentage. It includes all management, custody, and administrative fees. TER matters because it compounds against your returns every year. A 0.8% difference in TER over 30 years can cost CHF 50,000 or more.
Can I have multiple 3a investment fund accounts?
Yes, you can have multiple pillar 3a accounts with different providers. This is strategically beneficial for tax optimization at retirement. Withdrawing from separate, smaller accounts over multiple years keeps each withdrawal in a lower tax bracket. Most investors benefit from having 3-5 accounts by retirement.