SWITZERLAND – Changes to International Accounting Standards (IAS), combined with adjustments to local rules, are set to increase Swiss pension funds' liabilities this year, Towers Watson has warned.
Senior consultant John Carter cited a number of contributing factors, particularly low discount rates that remain trapped in "a negative spiral".
In the fourth quarter 2012, the discount rate stood at 1.62% compared with 2.41% at the beginning of last year.
"But, driven by the capital market," he said, "the investment returns helped to dampen this negative effect on company balance sheets."
Given the low discount rate environment, several Swiss Pensionskassen are now thinking to adjust their internal rates, or have already done so, according to Peter Zanella, managing director at Towers Watson in Switzerland.
He told IPE he expected local industry experts to adjust their recommendations on the so-called technischer Zins towards "2.5% or 3%" this year.
Last year, the consultancy warned that Swiss liabilities had been miscalculated based on an average 2012 discount rate of 3.5%.
Zanella said pressure on liabilities also stemmed from changes to international accounting standards, set to increase liabilities for multinationals by as much as 10%.
"The changes apply to the discount rate but also to mortality tables, as now generation tables or similar basic assumptions with a stronger focus on future longevity have to be applied," he said.
He also pointed out that calculations for defined benefit obligations and annual pension costs had changed in connection with new risk-sharing regulations.
"In total," he said, "there will be additional costs of 8-10%."
In the Netherlands, Mercer recently issued a similar warning on the impact of IAS rule changes on Dutch multinational companies.