Etf's beat pension funds but tax must be considered

Pension fund or DIY? Pension provision is a serious matter and must be built with solid and efficient bricks. Not least because by the time one reaches the pension milestone it is too late to remedy the creaking and wobbling house under the weight of costs and the wrong initial asset allocation of the 'second pillar'.

If one compares the overall performance of supplementary pension schemes with simple ETFs selected by Consultique according to the vocation of the different lines, one realises that the clones have more sprint.

Over the past decade, the results have been particularly meagre for supplementary pensions, especially for the lines most popular with members, i.e. bond and guaranteed lines, due to the very low rates that characterised much of the period under consideration (also saddened by the sudden rise in 2022-23 as well as the surge in inflation).

But let us start with the best performers, i.e. the equity lines currently chosen, however, by only 11% of members. We are faced with returns of an average of 4.7% per annum (net of costs) for open-ended funds and PIPs and 4% for negotiated funds. An Etf on the Msci world index (representative of the world's stock exchanges) would instead return a good 10% on average per year. A big difference that can be partly explained by the fact that, generally, supplementary pension equity lines are not pure, i.e., despite the name, they only invest a certain percentage on stock exchanges (93% for Pip lines and 61% for negotiated and 78% for open-end funds).

The race is not much better for the mixed bond lines of the negotiated funds that have returned 2.4% (in line with the revaluation of the severance pay) while the Etf considered by Consultique (75% bonds and 25% shares) have gained 3.8% on average per annum, a result well above the even more disappointing performance of the open-ended funds that have stopped at 0.7% on average per annum. Even more embarrassing is the comparison for balanced lines, with negotiated funds yielding 2.5% over the last 10 years while open-ended funds 2.7% (1.7% for PIPs) compared with a basket of ETFs made up of 50% bonds and 50% equities, which scored 6.62%. These are probably benchmark discrepancies, but these differences are striking and are also affected, as Covip notes, by the costs that make a difference in the long run.