Bonus Season Dilemma: Pension Fund or Stock Portfolio?

Coming to the end of the year, employees start envisioning their bonuses and asking themselves whether it might be worth making a pension fund contribution to reduce their tax burden. The question is straightforward, but the answer is not. Should CHF 50'000 go into the BVG, or would it be wiser to invest the same amount in a stock portfolio? The outcome depends very much on the time horizon.

Additional Pension Fund Contributions

A BVG contribution has one very clear advantage: the immediate tax saving. Someone in a 30% marginal tax bracket would save CHF 15'000 in taxes right away by contributing CHF 50'000. That’s a benefit you can feel instantly. In addition, the capital earns guaranteed interest, and the contribution strengthens your retirement entitlements.

The trade-off, however, is flexibility. Once the money is in the pension fund, it’s tied up until retirement, unless you qualify for an exception such as buying a home or moving abroad. And although the BVG is safe, the returns are modest. Over a 15-year horizon, including the tax saving, net returns average around 3–4% per year.

With a horizon of just five years, though, the BVG looks particularly attractive: the tax deduction is immediate, and you don’t miss liquidity over such a short period.

Stock Portfolio Investment

A stock portfolio offers a distinct value proposition: it is liquid, flexible, and has historically delivered the highest long-term returns. Assuming average market growth of 7% per year and deducting 1.5% in fees, the net return comes to about 5.5% annually. Over 15 years, CHF 50'000 could grow to roughly CHF 109'000 – more than doubling the capital. The longer the investment horizon, the more compelling equities become, as short-term fluctuations tend to smooth out over time.

From a tax perspective, equities provide another advantage. In Switzerland, capital gains are tax-free for individuals, making them particularly attractive for strategies focused on growth rather than dividends, since dividends are fully subject to income tax. In addition, platform choice can make a significant difference: by investing through low-cost ETFs, fees can often be reduced from around 1.5% to just 0.5% annually – a small change that greatly enhances the compounding effect over time.

On a five-year horizon, however, the picture is less clear. Your investment might grow to around CHF 65'600, but market volatility also means it could just as easily lose value if a downturn occurs.

Conclusion:
So which is better? With 15 years ahead of you, the stock portfolio has the stronger case, delivering superior growth despite its ups and downs. Over five years, however, the pension fund contribution usually comes out on top, thanks to the immediate and guaranteed tax advantage.

In the end, the choice reflects personal priorities: do you value security and tax efficiency, or are you prepared to embrace volatility in pursuit of long-term growth?