The year 2015 marked a turning point in the Swiss demography. Since then, there are more people reaching retirement age every year than people turning 20 years old and entering the job market. The AHV has been recording a negative apportionment result year after year and in many pension funds, an increasing benefit period is pushing the conversion rate under five percent.
A low interest rate environment forces a rethink
The persistently low interest environment is also lowering returns on fixed-income accounts. As a result, the investment success of private savings has become all the more important for old age, including pillar 3a. Our new study (UBS House View – Pension Provision ) shows how retirement savers can invest their pillar 3a capital sensibly until they reach retirement age, depending on their age and corresponding investment horizon.
Capital preservation is the primary goal
As retirement savings should ensure financial security in old age, we set capital preservation as our primary objective. Based on modeling, this goal is considered to be achieved when there is a minimum of an 85 percent probability that you can expect a nominal gain (this means no losses) at the end of the investment horizon. Striving for the highest returns possible is our second goal.
An equity share is decisive
Historically speaking, stocks bring significantly higher returns than bonds over the long term, and the risk of loss declines with a longer holding period. The longer the investment horizon, the higher the equity share should be in your retirement portfolio.