Baptiste’s Blog: The Poor Swiss

Baptiste’s free PDF for finding low-cost financial products

Swiss retirement accounts (official government info)

Neon Bank

The debt enforcement register (official government info)

Moneyland

Comparis

- Hello everybody and welcome to another episode of Living in Switzerland. The series is brought to you by Rigby. We are a staffing and IT services company based in Zurich. If you or anyone you know of is looking for a new role in Switzerland, or if you're looking to hire, let us know. We'd be happy to help. The best way to do that is by sending an email to contact@rigby.ch.

Today we are joined by Baptiste Wicht from the blog The Poor Swiss. Baptiste is a 35-year-old software engineer with a personal finance and investing hobby. He has been writing The Poor Swiss blog for over six years and trying to raise financial awareness in Switzerland. When he is not blogging or coding, he is playing Duplo with his son, reading novels, playing video games or drinking coffee.

Baptiste, welcome to the podcast.

- Thank you for the introduction. Very nice to be here.

- Let's start by you just telling us a little bit about who you are and what you do.

- Sure. So, most has been said already in the introduction, but I'm a software engineer, which is my main job, and on the side I have this blog, The Poor Swiss, where I try to teach what I've learned in personal finance in Switzerland.

I'm married to a Chinese wife that just joined us, like, in Switzerland about five years ago.  We also went through kind of all these hurdles that I also try to share on the blog.

And I have many colleagues in my company that are expats. So I see, like… there are many troubles in Switzerland for that. So I'm trying to also not only focus on expats, but they are like a group that's difficult to settle in Switzerland properly without falling into many traps.

- Right. And your blog obviously is written in English, so it would automatically attract a lot of expats.

- Yeah, exactly. So I get many comments from expats on my blog. It's probably not the main audience, but still many of them, mainly because it's written in English, even though it's translated also in French and German. But the main language has always been English.

- Right. Yeah. So that's really helpful for just, attracting a wider audience.

Tell us a little bit more about your blog. So like, why did you set it up and what kind of information do you share on it?

- So I set it up at the very beginning just as a journal. My personal finances were not as good as I was thinking when I actually computed all the numbers down and learned a bit more about it. So I started a journal online just to be accountable and share what I learned, but mostly at the beginning just like, share my progress.

And over time as I learned more and more, I found out that many of the things were not obvious and many things were not known by as many people as they should. So I tried, I started sharing everything I could.

And now the blog is more about sharing what I have rather than like just a journal, even though I still keep it as a monthly journal as well.

- Right. So you do both. You share articles. And yeah, okay.

- I have one article per month, which is like my, our progress, our monthly update, which I've kept going from like the very beginning five years ago, almost six now. But most of the other articles are like, informational articles about finance in Switzerland, investing in general, that kind of thing. Yeah. Budgeting.

- And you also keep quite up to date with what's on offer, for example, accounts, you know, bank accounts and things like that. Right. So presumably you update that regularly as well.

- Yeah. So I try to review like new services that pop up. Like there are many, many new digital services coming up every year now in Switzerland these days. So I try to review them.

And I also try to keep track of which one is the best and like, compare them one to another. So I also spend a lot of time updating old articles to keep them as up to date as possible. So it's not always easy because new things pop up all the time. But I try to keep it as fresh as possible.

- Yeah. But that'd be really helpful for everyone, really, including expats.

So let's talk a little bit about if someone comes to Switzerland as a new expat and maybe they don't have any experience about setting up any accounts in Switzerland, what do they need to know? Maybe you can explain the system briefly.

- Sure. So the banking system itself is not very special, I would say. It's kind of like everywhere.

One of the things that's important is that you get some of the very big banks, let's say UBS, where you will have an easy time speaking English. But if you go to like, a small local cantonal bank in most of the cantons in Switzerland, it will be very difficult to speak anything else than French or German or Italian, depending on which region you are. That's often a barrier for many people.

Another issue with the banking system is that depending on your permit, which permit you have to come to Switzerland, some of the banks will refuse you. The worst case is, unfortunately, if you are from the US, because of regulations, many of the banks will just simply not accept US citizens.

So in those cases, even though this may not be the best option, some of the expats will be stuck with the big banks because they know how to deal with all these regulations. That may not be the cheapest, but what matters most is to get the first bank account going and things can be optimized later because they need to get their salary being paid.

- Right. And maybe just briefly for the people who don't live in Switzerland yet, can you explain the difference between a national and a cantonal bank?

- So basically, if you get something like UBS, you will have offices in most of the large cities in Switzerland.

But if you get the cantonal bank, you can only deal with them in your canton. For instance, if you go to Zurich, there is the Zurich cantonal bank. But as soon as you will leave Zurich, you will not find offices of this cantonal bank anymore. So they are very local, but most of the time they are also quite good. They are fairly priced. They have good availability. Maybe in Zurich it's probably okay, but in small cities like, let's say, Fribourg, the Fribourg cantonal bank will not be great at speaking your foreign language.

- Right, yes.

- Depending on which canton you are in, you may find it more expat friendly or not.  But it's mostly local bank against national banks.

On the feature side, on the fees, it makes relatively little differences, but on the availability, it's more important to know the differences.

- As I understand it, one of the advantages of the cantonal banks is that they protect more of your money. I mean, some of them, is that correct?

- Yeah, it's correct. But it's unfortunately, as you said, just some of them.

Some of the cantonal banks, I mean, no, most of the cantonal banks have a state guarantee. So if they bankrupt and the money is nowhere to be found, the state itself, like the canton, will intervene and will pay back the customers.

- All of the money?

- Yes, it's a non-limited state guarantee that only these cantonal banks have. Other banks don't have that. So the general deposit guarantee in Switzerland is 100,000 Swiss francs per person. So that's like the basic one.

And if you go higher than that, then you have the unlimited state guarantee for these cantonal banks. Otherwise, you will be left with the other creditors to the banks in case of bankruptcy. So not very likely, but still it could help to be protected. But as you mentioned, some of them are exceptions. I don’t know by heart, but I believe, for instance, Geneva was excluded from the state guarantee, and I think there are a few others that were also excluded.

- Yeah, so it's important, depending on where you settle, to just review the rules.

But yeah, if you are planning on storing maybe more than 100,000 Swiss francs in a single bank, that could be a consideration, maybe.

- Exactly. Yeah. If you store a significant amount of cash, you need to be careful about these guarantees. You can use multiple banks as well.

- Yes.

- Just spread the risk. Yeah, that's the main idea.

- Do you have any tips about storing cash? So obviously in Switzerland, the interest rates are quite low. Are there any better options than just parking your money in the bank?

- So I believe it will depend on how much cash. For a small amount that you want available, like your emergency fund, banks are still the best options.

But if you want to keep a large amount of cash for any reason, a bank is still OK, but you get somehow low interest rates, about 1.5% these days. And fortunately, it's been increasing these last few months.

Other than that, if you need more, you can also use certificates of deposits from your bank. So they will have higher interest rates, but they will be locked for some amount of time. Either you have something like fixed term, which is a short one, up to 12 months, or long-term, which will be up to 10 or 20 years. But then it gets locked for a long time.

So you need to be sure that you can store it that way. But that's a very safe investment.

- Yes. So for people who would like to just store some cash, maybe midterm or short term.

So once you're sorted with a bank account, so let's say our new expat has already got a bank account, they're ready to work, they've started at their new company. The next important thing is to set up retirement accounts, isn't it? So that's going to be where most people save the most money. Can you just speak about what the retirement accounts are in Switzerland and maybe how they work?

- Yeah. So our retirement system is based on the three pillars. So the first one, Pillar One, is the social security. Basically, that one is the same for everybody. So you contribute something every month based on your income. And even if you don't work, you have to contribute that. And then at the end, based on your average salary and the number of years you've contributed, you will get a pension, which will be a monthly pension.

So it's not very high. That's why we have the other pillars that are more important if you want to retire with enough money to live. And although the first pillar, there's not much you can do about it. It's kind of the same for everybody.

On the other hand, the second pillar becomes more interesting. So the second pillar is an occupational pension. That means that only working people or employed people will contribute to it. There's also a minimum, which is, I believe, something like 21,000. If you have an income below that for a year, you will not contribute, but most employed people will contribute.

And there, it's more interesting because what you will get in retirement is based on your average salary and how much you contributed.

So the maximum for the second pillar is very high. You could insure your salary all the way, I think it covers to 800,000 per year. So you could contribute a lot of money here and also get a lot in retirement if you always contributed.

Most important is this point, if you always contributed, especially for expats, because they will often not come… The second pillar starts at either 20 or 25 or even 18, depending on your pension plan. But most expats will not come to Switzerland at 25.

So let's say they arrive at 40 in Switzerland, they kind of already missed at least 15 years of contributions.

And since the final pension will be based on how many you contributed, even if you had a high salary for 20 or 25 years until you arrive, you still missed 15 years of contributions. So that will weigh very heavily on the final pension you will get.

What's also interesting is that you can fill these gaps. And when you do… So you can do a voluntary contribution to the second pillar, because standard contributions are extracted out of your income every month, and both you and your employer are paying that, but you can do a voluntary contribution and that is tax deductible.

So that means at the end of the year, everything you contributed to the second pillar can be removed from your taxable income. And that can reduce your taxes significantly and also increase your retirement benefits significantly.

- Right. So if you came later or you have a gap because you didn't work for a year, you can fill that gap if you've got extra money to contribute.

- Exactly. Yes. And although the interesting part is even if you have no missing years, you could still have gaps if your salary increases over time, because it's based on your average salary. So they compute like… how much you should have based on the number of years and the average salary you have now. So with that, you often get gaps.

So even if your salary increases a few percent every year, you will get gaps increasing. And that could be like significant amounts. So that's where it could be interesting to put money into the second pillar.

- Right.

- Of course, you have to look at which pension plan you have, because you have a different one for each company in Switzerland. So your employer can choose it, but not you.

And there are some very good ones. There are not some bad ones in the sense that there is a mandatory interest rate by a low of 1% at this point.

- Okay.

- But there are some that provide very good returns, about 4 or 5% per year. And there are those that provide just the minimum 1% per year. So that's all improving.

If you have a very good one, it makes a lot of sense to contribute because you have tax benefits and also good returns. If you have a lower one, you still have to debate, do the maths, whether it makes sense. But that's still a good way to save on taxes.

- Right. Yes. Because that would make a big difference, for example, if then you could use your own investment account and make a higher return.

You have to see whether it still makes sense with the tax.

- Exactly. Yes.

- Okay. And then there's a third pillar, isn't there?

- Yep, there is. So that one is entirely optional. So the first and second one were mandatory. You cannot opt out, but you can… the third pillar is opt-in.

So that's something also only for employed people. So you need a second pillar in order to have a third pillar. You have the same conditions.

And that one, you can contribute a fixed amount of money per year. In 2023, that was like 7,056 francs. And every two years, it's being adapted. And this is also tax deductible.

And there, since it's not linked to your employer, you can choose your third pillar. And there are many options, including very good ones these days. There are some digital options that are very good investment opportunities.

So you could put this 7,000 francs in an investment account and every year add this amount to it and then deduct this 7,000 from your taxable income. So for most people, the third pillar, if you have enough income, it's a very good opportunity because you can invest it almost as you want.

- Right.

- So you would recommend for most people, it depends on the individual situation, of course, but would you recommend that people fill their third pillar first and then go and add more money to the second pillar if they've still got more money?

- Exactly. Yes. I think the third pillar is like almost a no brainer as long as you have a decent income, I would say. And of course, the capacity to fill it. And even if you don't fill  it, you could also put like 3,000 per year or 1,000 per year. But that's a very good way to start.

For people with, like, very significant incomes, 7,000 per year is not a huge amount. And that's where contribution to the second pillar becomes interesting.

- Right. OK, so third pillar, definitely. And then second pillar, if you've still got more money left over.

- Although there is a trap in the third pillar. And that's a trap that many expats will fall into it. So they have to be very careful that the third pillar can be in a bank account or investment account or with a life insurance. And unfortunately, life insurance third pillar is, like, bad 99% of the time, at least, maybe more.

- OK.

- Because they are very expensive. Because a lot of the fees go to the advisor, they get like a cashback. Also, because a lot of the premium is going to the risk part and not to the savings part. So in the end, you may get less than you contributed.

And they just very, very bad returns over time. So I would never recommend them.

But expats are very often the targets of insurance advisors when they arrive in Switzerland. And the first thing they will recommend is a life insurance third pillar, even for people that don't need life insurance. So that's something a little scammy, I would say, almost.

- OK, so definitely you would recommend an investment account third pillar and not a life insurance one.

- Yes. And even if you don't want to invest it, just put it in a bank. There are like three accounts that are pure cash and you get maybe 1 or 1.2 or 1.5% interest.

Even that will be better, again, 99% of the case than the life insurance third pillar.

- OK. Yes, that's a good tip, especially if expats are approached by people when they arrive.

So in addition to retirement accounts, some people might not want to put all their money in retirement accounts because they need it maybe sooner.

So, you can also set up investment accounts. Can you tell us a little bit about how to set up your first investment account in Switzerland?

- Yep. So here is a case where so often people will have their first bank and most banks in Switzerland also have investment features.

The problem with most banks, especially big banks, is that they are very expensive. They will take like a yearly fee of 1% or maybe even more. On top of that, they will have like very large transaction fees and other often hidden fees and often also actually bad investment options.

So that's where even though it may be simple to have it at the same bank where you already have your cash and current account, that's one case where I believe that a separate account is most of the time better.

So using an online broker, an actual broker that only does brokerage, I would say, is often the best option. And then you can invest.

There are many ways to invest. Personally, I recommend phones, but that's probably a whole other debate.

And I think, like, the most important thing is checking the fees and making sure you don't get, like, really, really too many.

- Yeah, it can get very expensive. And then obviously over time, especially for expats who are maybe staying for the long term, that can make a huge difference in your returns.

- And one interesting thing for expat as well is that they may try to choose an investment account that they can keep if they then leave Switzerland, because many expats are here for five, ten years or 20 years and then they maybe retire in their own country or stay here the whole time.

But if they want like the flexibility, if they choose, for instance, a Swiss broker, they will be unlikely to be able to keep their investment account once they move back to any other country. So that's something interesting also with some online brokers, not all of them, of course, that they could keep their accounts regardless of where they go.

- Yes, definitely. So that's something worth checking before you sign up to an account.

- Exactly.

- And then maybe the last thing is credit cards. So can you just briefly explain how credit cards work in Switzerland? Is there anything different about them?

- The basic is still the same. There are credit cards, you can get a fixed amount of total per month.

One difference is that compared to some countries, especially the US, we have very low cash back. So you don't get these great, like, 5% cash back or whatever you get for offers. And it doesn't make sense to switch your credit card every three months to profit from offers like some people try to do.

And we also have, like, very bad travel credit cards. So what I usually recommend is get a free credit card with as much cash back as you can get, which will not be a lot, but maybe 0.5% is already good for a free credit card. And you also have to be careful that these credit cards are very expensive to use abroad. If you get a Swiss credit card and use it even in France, you get like up to 2 or 3% fees on each transaction. And that's where you may need, like, again, a third card, unfortunately. Something like Wise or Revolut or Neon in Switzerland, where you will get like much cheaper transaction fees abroad. So again, it's not one size fits all things. You need specific cards for specific utilities.

- Yeah. So for people who travel abroad a lot, they might need an extra card from a different provider and not use their regular credit card.

- Exactly.

- In terms of credit score, how does it work in Switzerland?

I was very confused when I came to England and people started talking about credit scores, and I'd never heard of that in Switzerland. So is there no credit score in Switzerland or how does it work?

- So there is no official credit score. So you cannot get like your official credit score, like, nationwide like you can in the US.

However, sometimes there is, like, so there are two things. There is the debt collection register that if you want to rent an apartment, you need to prove that you don't have any unpaid debt. If you are not late on your payments. And that is something that’s… on each canton, they have an office for that. And that just gives them proof that you are a good payer.

The other thing is some, for instance, if you get, if you ask for a credit card, they will ask some agencies, but they are not transparent. You don't exactly know what they have on you, to know like how much they can give you per month.

If you have a bad, kind of, credit history, you will then get like maybe less than the maximum you could get per month on your credit card. But it's not a transparent system where you get a score. You don't actually know exactly what they have on you. Just kind of obscure system.

But it's, it also doesn't make any sense to, like, get five credit cards and keep some balances and to try to optimize your credit score. If you want to optimize your credit in Switzerland, just pay all your bills in time and never get any debt. That's more simple.

- Okay. So in some ways, it's a little bit simpler than in some other countries.

- I think so. You don't have to worry about that. And, like, your credit score will not influence like, for instance, your mortgage capabilities or things like that.

So your mortgage doesn't really care about your credit cards or vice versa. So it's okay.

- Okay. They only care about whether you've got other debt and what your income is or what are the criteria?

- Yeah. So mostly the income. Obviously, if you are in debt, and you have like people like trying to collect debt from you, in that case, that will be a very bad sign. But if you have no debt, or… then they will look at like your income, and how much you can afford to pay for your mortgage. So it's slightly different. There is a legal framework around that. But banks sometimes make, like, slightly different interpretation of the framework. So it may vary from bank to bank.

- Right.

So if we summarize just what an expat needs to do to optimize their financial situation when they come in Switzerland, could we say maybe just start by researching banks for your first bank account, make sure you get a low fee bank account if you can.

And then the next thing would be to make sure you're parking your cash if you need to park cash in a sensible account. So obviously, interest rates aren't great, but trying to optimize that.

And then maybe arguably, the most important thing is to optimize the pensions as well. And make sure you're not… if you're doing investment accounts, to not use accounts that have high fees.

Would you agree with that? Or is there anything else that needs to be, sort of, optimized?

- No, I think that's a very good plan. You may also be careful about your insurances when you come in Switzerland.

- Yes.

- Because so some of them are mandatory, like you need health insurance in Switzerland, there's no way around it. But then you have the basic insurance and the complementary health insurance that are not mandatory.

And sometimes they may get a bit pushed towards people. So also be careful not to get, like, over insured.

- Yes.

- And again, compare health insurance, we have like, at least 50 providers in Switzerland. They mostly do the same thing, but at different prices. That's something also, again, that's kind of the theme in Switzerland. Check the prices and be careful.

- So compare a lot between different providers and try to find one that is reasonably priced. And I think if you do that, you'll be quite optimized already. And you'll have covered most of what you can do to keep yourself from paying too many fees.

- Yes. If you follow that plan, then like, be careful about what you subscribe to. I think you will be already ahead of most people.

- That's right. Can you do all of this yourself? Would you recommend that people do this themselves? Or would it be helpful to get professional advice?

Because it can feel maybe a little bit overwhelming to have to do all of this at once coming as an expat.

- Yeah, so I think you can do it everything yourself. The problem is that if I knew a great professional advisor on that, I would recommend it.

The problem is that most of them are not that great, and they are very, very expensive. And they will also, like if you delegate your finances to them, like for investments, they will take also a huge fee out of your savings, not only like a flat fee.

So you can probably get some good ones. But I would say it's almost dangerous. If you do it yourself and learn it, of course, it takes time. There's no way around it.

And there's no barrier. There's nothing you cannot do yourself. So I think that's doable.

Even taxes. Most expats actually do use, like, a tax professional to do the taxes. But I don't think that's necessary. And that will, like, weigh on the finances every year.

At some point, of course, you also have to consider time. If you want to save time and pay money for it, then doing your taxes by somebody else may be interesting.

But there's nothing you cannot do yourself.

- Yes, I suppose if you're employed, you have a normal salary and not too many extra things, your taxes won't be too complicated.

- Exactly. Yeah. So that's a very good point about complicated, like, situation. If you have, like, a large estate or if you run a company or if you have, like, multiple small incomes coming in from different places, that could be where a professional could help you as well.

And in that case, I would recommend trying to find somebody with flat fee.

- Right. You got your Swiss clock going.

- All right. Yes. So if expats do decide to do all this themselves, they'll need a lot of resources, I think, just to have a look, to research.

So where can they get started? Maybe on your blog? Is there a way to go through this step by step?

- So I have a few resources on my blog. I have like a PDF with, like, the best resources for the money that we, like, compare, like provide some good banks, some good 3A, some good investment accounts.

And there are also some very good comparison sites in Switzerland, for instance, if you want to compare your health insurance and use either the cheapest one or the best one for your needs, depending on what you want.

And there, for instance, we have Moneyland or Comparis that are quite good and quite complete. And I think it's important to compare and maybe use more than one resource to be sure that things converge to the same point.

- Yes, exactly. So obviously, the more resources you use, the more sure you can be that you're doing the best possible.

So would you, I've looked at that resource on your blog. So I think I would recommend that just as a starting point that you get some names, some ideas of maybe banks or companies to use.

And then expats can, kind of, research with these comparison sites to double check. Is that what you'd recommend?

- Yes, I think it's a good starting point.

I've tried to put it together, like, as a… also in a short way, because sometimes they may not have that much time or they have to think about also moving to Switzerland, which is, like, all those things on the side, not only money. So having a good starting point that doesn't take too much time is important. And then they can, like, dig further into resources.

- That sounds like a good strategy to get started for an expat.

Excellent. So I think this has been really helpful. Thank you so much for coming on.

Before we leave it, can you tell us a little bit more about how to connect with you if someone has a follow-up question or would like to connect with your blog? How do they do that? Where can they find you?

- Sure. So my blog is thepoorswiss.com. And if you go to the top bar, you can get the contact information. So you can either directly contact me on… through email or through the contact form or leave a comment on one of my articles, and I try to answer all of them.

- All right, that's it for today.

So thanks once again to Baptiste for joining us and to you for listening. We'll include links in the show notes to our guests and to further materials about some of the topics that we've spoken about today.

Once again, this podcast was brought to you by Rigby. We're a staffing and IT services company here in Zurich. If you would like our help either to hire or to be hired, let us know. Best way to do that is by sending an email to contact@rigby.ch.

You can also sign up for our newsletter at rigby.ch/newsletter to receive our Living in Switzerland guide. We'll send you one email per month about expat-focused news and jobs in Switzerland. So thanks and until next time.