SWITZERLAND – Aargauische Pensionskasse (APK), a €3.2bn pension fund for Swiss civil servants, says a strong performance by its equity and commodities investments helped it achieve a 13% return on assets in 2005 – its best ever.
APK said the good performance of its portfolio would help improve its overall financial health. It added that further details on the performance would be disclosed at a news conference in late April.
Like other Swiss public schemes, APK’s coverage ratio has fallen well below 100%. This is in part due to the equity market crash of 2000-2003. Its last reported coverage ratio of around 75% is, however, not so serious considering the scheme’s implicit government guarantee.
Still, chronic underfunding at Swiss schemes has prompted ASIP, their political lobby, to urge the government to cut the annual rate of interest they must guarantee to 2% from 2.5% currently. The government has so far left the rate unchanged.
ASIP argues that the reduction would give the schemes more flexibility to rebuild their reserves. Low returns on bond markets is another important reason why the rate should be reduced, it says.
APK insures about 29,000 civil servants and teachers in the Swiss canton of Aargau. Its pensioners number close to 7,000. As IPE reported last autumn, it plans to switch to a defined contribution scheme from a defined benefit one by 2007.
APK managing director Susanne Jäger told IPE that the prime motivation for the switch was that APK would “no longer have to pay the difference between interest rates on the market and interest rates that we credit the insured”.