Glossary: financial terms explained simply

A comparison of 3a equity funds helps investors find the best options — by cost, performance, sustainability or investment strategy. It is particularly important because over the long term even small differences in fees and returns have a big effect.

Compound interest arises when returns are not withdrawn but reinvested, so that they generate returns themselves. Over long periods, assets grow exponentially rather than linearly. This effect is the main reason to start investing early.

Deposit insurance protects bank balances up to CHF 100'000 per customer and bank if a Swiss bank becomes insolvent. It is provided by esisuisse, the deposit insurance scheme of the Swiss banks. Securities held in a custody account are not affected: they remain your property even in the event of bankruptcy.

An early withdrawal for home ownership (WEF withdrawal) is the early withdrawal of 3a assets to finance, renovate or repay the mortgage on owner-occupied residential property.

The equity share is the portion of the fund’s assets invested in equities. The higher it is, the greater the return potential, but also the fluctuations. Over a long investment horizon, fluctuations usually even out, which is why many pension funds opt for a high equity share.

An ETF (exchange-traded fund) is a fund traded on the stock exchange that tracks an index such as the SPI or MSCI World. Instead of buying individual shares, an ETF lets you invest in hundreds of companies at once. Because no fund manager actively selects securities, the running costs (TER) are considerably lower than for conventional investment funds.

1e plans are a form of occupational pension provision for higher salary components. Insured members choose the investment strategy for this part of their assets themselves and also bear the investment risk. The name comes from Article 1e of the BVV 2 ordinance, which governs this freedom of choice.

Your pension fund assets consist of two parts: the mandatory portion, which corresponds to the statutory BVG minimum, and the extra-mandatory portion, i.e. everything saved beyond that. More flexible rules apply to the extra-mandatory portion, for example for interest, the conversion rate or investment in securities. How your assets are split is shown on your pension certificate or exit statement.

FINMA (the Swiss Financial Market Supervisory Authority) is the Swiss supervisory authority for banks, insurers and other financial service providers. It grants licences, monitors compliance with the rules and can intervene in the event of violations. FINMA regulation is an important signal of a provider’s trustworthiness.

An index fund tracks a market index as closely as possible instead of trying to beat it through active stock picking. Unlike ETFs, index funds are not traded on the stock exchange but bought directly from the provider and valued once a day. Index funds are widespread in pillar 3a because stock exchange trading plays no role there and, as a rule, no stamp duty is charged on purchase.

Annual interest rate on the balance. Often variable — the provider adjusts it according to market conditions.

The investment horizon is the period over which you can leave your money invested. The longer it is, the more price fluctuations even out and the higher the equity share can be. For money you need within a few years, securities are hardly suitable.

An investment strategy defines how assets are spread across equities, bonds and other asset classes, matched to your risk profile and investment horizon. In pillar 3a and the vested benefits investment account, you typically choose between strategies with different equity shares. A strategy is managed either actively by a fund management team or passively according to an index.

A joint account is an account with several equal holders, typical for couples or flatshares. With a real joint account, all holders have their own access and their own card; some providers instead offer a banking package for two, i.e. two linked individual accounts. The rules on signing authority matter: who can trigger payments alone.

When pension assets from pillar 3a or the pension fund are paid out, a one-off lump-sum withdrawal tax is due. It is calculated separately from your other income and at a reduced rate, but rises with the size of the payout. Staggered withdrawals over several years can break the progression and save tax.

The marginal tax rate indicates how heavily an additional franc of income is taxed. Because of tax progression, it is higher than the average tax rate: the higher your income, the more tax the last franc costs. That is why a pillar 3a deduction saves more tax at a high income than at a low one.

A neobank is a bank without branches; you manage the account entirely via the app. Thanks to low fixed costs, account management and cards are often free or considerably cheaper than at traditional banks. Some neobanks hold their own Swiss banking licence, others work with a partner bank — which matters for deposit insurance.

The pension fund is Switzerland’s occupational pension provision, the second pillar. Employer and employee pay contributions together so that a second pension is available in old age alongside the AHV. Anyone who is employed and earns more than the statutory entry threshold is insured.

Performance describes the development in the value of a fund over a given period, usually stated as a percentage. It is a key criterion when comparing 3a equity funds, as it shows how successful a fund has been in the past.

The annual maximum you may pay into pillar 3a. In 2026 it is CHF 7'258 for employees (people with a pension fund) and CHF 36'288 for the self-employed (people without a pension fund).

A 3a equity fund is an investment fund within the third pillar that invests mainly in equities. This offers higher return potential than pure bond or mixed funds, but also greater fluctuations in value.

The return is the actual interest or profit development of a fund in relation to the capital invested. For 3a equity funds it depends heavily on the stock market situation and the investment strategy.

Because 3a equity funds invest in equities, they are subject to market fluctuations. The higher the equity share, the greater the short-term risks can be — but over the long term, the return potential rises.

With a savings plan you automatically invest a fixed amount on a regular basis, for example CHF 200 a month. There are two forms in Switzerland: with an ETF savings plan you pick the ETFs yourself; with a strategy savings plan the provider makes the selection based on your risk profile. Investing regularly smooths out the entry point and makes building wealth possible without a large starting capital.

Stamp duty (transfer tax) is a federal tax on the purchase and sale of securities via Swiss providers: 0.075 % on domestic and 0.15 % on foreign securities. It is due on every transaction and settled directly by the broker.

Your income after all deductions — it appears in your last tax return or assessment and is lower than your gross salary. Married couples: the joint income.

The TER states a fund’s total annual costs. It directly affects the net return and is therefore an important comparison criterion.

Pillar 3a is part of private pension provision in Switzerland. It allows you to build up capital for retirement with tax advantages. Contributions can be deducted from taxable income every year, but the capital remains locked in until retirement (with a few exceptions).

Vested benefits refers to your right to take the pension fund assets you have saved with you when you change jobs. If you leave your pension fund without joining a new one straight away — for example during a career break, further education or unemployment — the assets are transferred to a vested benefits institution. They remain locked in there until retirement; a cash payout is only possible in cases defined by law, such as taking up self-employment or permanently leaving Switzerland.

A vested benefits account is an interest-bearing account with a bank or foundation that takes in your pension fund assets while you are temporarily not a member of any pension fund. The assets remain locked in until retirement; an early withdrawal is only possible in exceptional cases, such as for home ownership or on permanently leaving Switzerland. Interest rates differ considerably between providers.

A vested benefits investment account invests your vested benefits in securities instead of earning interest in an account. That increases the return potential but also brings price fluctuations. It makes sense above all if the assets will remain locked in for many years and you can sit out the fluctuations.