How do you calculate pillar 3A?

In order to compare different Pillar 3A solutions with each other or to compare the effectiveness of a Pillar 3A compared to other investments, it is essential to understand how to calculate a Pillar 3A.

A distinction is made between a calculation for a 3^th Pillar A in banking and a 3^th Pillar A in insurance.

In the bank

It is a savings that can be invested in 2 ways:

• On a traditional account with a rate close to 0% currently. Yield calculation is easily done with financial calculation tools on the internet.
• On an investment fund account. The return is calculated on projections (not guaranteed) of the evolution of the funds, from which the annual fees of the bank and investment funds must be subtracted. There are also entry fees that can be taken into account.

Example:

• A person puts in CHF 5,000 per year for 30 years at a rate of 0.2% will receive CHF 154,741.- at maturity
• A person places CHF 5,000 per year for 30 years in an investment fund that provides for 4.5% per year with fees of 1.2% per year and bank fees of 0.5% per year will theoretically and without guarantee receive CHF 236,766.- at maturity.

In insurance

The 3^th Pillar A in insurance are calculated differently. The savings part must first be separated from the part of the risk that has a cost. The easiest way to calculate them is to take fixed interest rates (traditional traditional solutions) or announced projection rates and compare them with the guaranteed or projected capital at the end of the contract.

In fact, the 3^th Pillar A in insurance is calculated using the amounts paid into savings and the final capital. From there, the calculation of net interest (expenses deducted) is done with a financial calculator.

Example:

A person puts CHF 5,000.- per year (excluding the cost of risk) for 30 years and will receive CHF 162,400.- at maturity, his interest rate per year is 0.5% A person places CHF 5,000 per year (excluding the cost of risk) for 30 years in an investment fund for 30 years and will receive in theory and without guarantee CHF 252,800.- at maturity, his annual return is therefore 3.18%

Tax return

Tax return is the real asset number 1 of 3^th Pillar A.

This return is calculated by taking the tax savings achieved each year subtracted from the final capital tax.

Example:

• A person pays CHF 5,000 per year for 30 years. Each year she saves CHF 1500.- in taxes according to her income, her canton of residence and her personal situation. At maturity, it will in principle receive at least CHF 150,000, which will generate a capital tax of around CHF 15,000.
• The tax return in this case is 1.57% per annum.

Since the capital acquired over the years does not contribute to wealth, we can still add this tax savings to the return.

example

Over a period of 30 years with an accumulated capital of CHF 150,000, the tax savings amount to around CHF 6,200, which generates an increase of around 4% in total capital

Conclusion

Calculate a solution of 3^th Pillar A is accessible and can be useful when comparing different investment solutions.

Do not hesitate to ask for advice.