How can True Wealth offer an interest rate of 1%?
True Wealth currently offers an interest rate of 1% on the cash portion of Pillar 3a retirement accounts. This is very high compared to other providers. The reason is that many traditional providers have large holdings of Pillar 3a funds on their balance sheets, which they used to refinance mortgages in the past when interest rates in Switzerland were still strongly negative. In the meantime, however, the National Bank has raised interest rates several times. But even if the National Bank raises interest rates, such providers cannot raise the interest rates on fixed-rate mortgages on their books, and accordingly they also find it difficult to pass on the National Bank's interest rate hike to pension savers in the third pillar.
From an investor's point of view, however, 1% is still not enough, because inflation in Switzerland is currently around 3% – i.e. the real interest rate is still -2% even at 1% interest.
In order to maintain the purchasing power of the pension assets in the long term, investments in securities, also in Pillar 3a, are indispensable. Therefore, we recommend our clients to consider investments in securities, also in Pillar 3a, despite the (nominally seen) attractive interest rate.