Aiming to go paperless
Swiss pension funds see technology primarily as a way of improving the efficiency of their business. Document imaging systems are enabling some funds to become paperless operations, while others are installing systems that will improve automation, lower the costs of investing and provide quicker, more accurate and comprehensive information. For those funds that see growth as the best route to optimising costs and extending the services they are able to provide to members, technology is the mechanism for supporting their expansion.
L’Etat de Fribourg Caisse de prevoyance du personnel, the public authority fund of Fribourg, is introducing a document imaging system that will enable it to store all members’ records electronically, thus achieving a paperless membership system, says Claude Schafer. This will entail scanning all the paper records and transferring the information to computer for onscreen access. This is also the first step in giving access to members’ account information via the internet, he says.
The Geneva-based Swiss federal social security and disability pension fund Fonds de compensation de l’Assurance-Vieillesse et Survivants (AVS) is currently introducing the Dimension portfolio management system from Copenhagen-based SimCorp. “When you are managing a large fund such as ours it seems to me to be a necessity to have a state-of-the-art portfolio management system,” says the fund’s managing director Eric Breval. The system should bring a number of benefits, including the containment of costs, although that is not the main purpose of the system.
“The main reasons for installing the system are to have an overview of our assets, as well as to have performance measurement and attribution and risk management,” says Breval. Until now, the fund has been dependent on its global custodian UBS to provide these functions, which is not an optimal position to be in, he says. “Our custodian is currently doing performance measurement and attribution and standard reports, which is not to say that what they do is not valid, but the least we should be able to do is give them our performance figures and cross check theirs,” says Breval.
Previously, AVS used an in-house system, but it did not provide the portfolio management functions that Dimension offers. Implementation of the system will take around nine months, and Breval anticipates that it will be a complex undertaking. “Any system that takes nine months to install is not going to be straightforward, and if it was, I would question the validity of the system,” he says.
System implementation is something that L’Etat de Fribourg Caisse de prevoyance du personnel has also found challenging. When an organisation installs any new system it has to check that it is compatible with its other applications, says Schafer. This can be a time-consuming exercise, because all data and calculations must be checked and there is no alternative but to sit down with an IT team and go through all the exceptions thrown up in testing.
Pensionskasse Stadt Zürich, the public authority pension fund of the city of Zurich, says that one of the main difficulties in integrating systems is keeping the number of application providers low and stable over time. This helps reduce costs and complexity. Ruth Basler, head of IT at the fund, also recommends that pension funds should “seek system specialists that exchange information and knowledge”, rather than a supplier that simply sells a system and leaves the organisation to figure out how best to use it. And it is particularly important that the system providers have expertise given the difficulties of adapting pension administration systems to new regulations issued by government or boards of trustees. For this reason, Basler recommends funds “use a software house with a good knowledge of local regulations and considerable market share in our business”.
Pensionskasse Stadt Zürich used a Swiss pension fund software company, which it did not name, to develop its administration system. The system is based on IBM’s iSeries servers with the company’s DB2 database, and provides the administration of the pension accounts of all 24,000 employees and 15,000 pensioners, processing payments, and supplying statistical data.
The iSeries server also provides the storage for the digital images of paper documents, with an interface to the administration system that enables high-speed access to document images. So like L’Etat de Fribourg Caisse de prevoyance du personnel, Pensionskasse Stadt Zürich is able to eliminate paper files and speed up member record access.
The degree to which pension funds in Switzerland use technology to bring functions in-house varies greatly from organisation to organisation. Pensionskasse Energie (PKE), the pension fund for Swiss utilities employees, operates almost all functions itself in-house. “We run our pension fund like a bank,” says Hermann Gerber, managing director of the fund. PKE uses a broad range of technology, making considerable use of the Bloomberg market data and trading system, and otherwise using services of its global custodian Credit Suisse Asset Management.
Meanwhile, the pension fund of Geneva-based corporate Serono International uses Lombard Odier Darier Hentsch, also based in Geneva, as its global custodian, while also outsourcing fund management, accounting and actuarial assessments, says the company’s treasurer Paul Wilkinson.
Economy of scale is one way of reducing costs, and this is the approach that some Swiss funds are taking to help meet the challenges of the current economic climate. Pensionskasse Stadt Zürich, for example, sees technology as a key factor in enabling it to attract and acquire other organisations, and support its expanded operations. “In order to optimise costs and improve conditions with investment companies, we are expanding by acquiring new member companies for the fund and increasing the number of people we manage,” says Basler.
The fund makes maximum use of its website to provide information to both its members and prospective members or organisations interested in joining forces with it. It also sees its document imaging as an important factor in making its help services more efficient and capable of expansion to support increased numbers of members and client companies.
So far, pension funds in Switzerland do not seem to be as advanced as their peers in countries such as Denmark and Sweden in providing members with access to their accounts via the internet. Pensionskasse Stadt Zürich currently has a module in its administration system that allows members to calculate their potential pension and other figures.
But members first have to input the data they receive in their annual paper-based statement. The fund now has plans to replace its current administration system with a new generation application that will allow members greater access to their accounts.