While account solutions remain very popular in Switzerland, many savers are also looking for more profitable alternatives, such as investment funds. Each savings and investment scheme has its own advantages and disadvantages.
Although account solutions carry very low interest in present times, they remain popular. The main reason is probably the fact that savings accounts are not subject to value fluctuations. In addition, interest is guaranteed, although even savings accounts that are subject to special conditions no longer earn more than 0.3% interest. At around 0.4%, account solutions in pillar 3a are not much more attractive. Once the account management fees have been deducted, there is virtually no income left. In times of inflation, savers may even lose money.
Thanks to the so-called depositor protection scheme, money on savings accounts is generally secure. However, in the event of a bank’s financial collapse, protection of deposits is limited to CHF 100,000 per client (not per account). Depositor protection, which provides for the privileged treatment of deposits in the event of bankruptcy, applies to savings accounts, medium-term bonds and time deposits.
Privileged treatment in the event of bankruptcy also applies to 3a accounts and vested benefit accounts. If there are any liquid funds left after a financial collapse, a maximum of CHF 100,000 is paid to each client, irrespective of any further deposits they may have made. Where customers hold both a 3a account and a vested benefit account, the sum of the two deposits serves as the calculation basis. However, in the case of both savings schemes, depositor protection does not apply on top if there are insufficient funds after the bank’s collapse.
Tip: Customers whose deposits in savings accounts significantly exceed CHF 100,000 should consider spreading their deposits over several banks for security purposes.
Investment funds offer more extensive bankruptcy protection
Low interest on savings accounts is pushing savers to look for alternatives with higher return opportunities. Investment funds represent a simple solution to creating long-term wealth. However, since they invest in equities, bonds and other securities, they are also subject to value fluctuations. Nevertheless, if the investment horizon is long enough, investors have a good chance of generating higher returns than through a savings account.
A further advantage over account solutions is the fact that funds are considered as ‘separate assets’. Portfolio assets are owned by the clients and are merely held in safe custody by the bank. Hence, in contrast to savings accounts, they do not appear on the bank’s balance sheet. This means that deposits are protected beyond the CHF 100,000 threshold, and investors benefit from more extensive bankruptcy protection than savings account holders. On top of this, funds are not subject to the withdrawal limits that usually apply to private accounts and savings accounts.