ASIP supports cut to conversion rate

SWITZERLAND - The Swiss pension fund association ASIP has waded into the debate on lowering the conversion rate in the second pillar and told unions their demands would lead to a collapse of the system.

ASIP claimed in a statement today that keeping the conversion rate at its current level was "a danger to the stability in the system".

Unions are supporting a referendum which is designed to stop a cut in the conversion rate and keep pension payouts at current levels. (See earlier IPE story: Front against conversion rate cut grows)

But ASIP has warned against the effects of a successful referendum could be damaging, especially as the referendum now has enough support to be launched as planned before the summer.

"The longer life expectancy and the developments on the financial markets make a cut in the conversion rate unavoidable," said ASIP.

The parliament had decided last year to lower the conversion rate from over 7% at present to 6.4% by 2015.

But ASIP argued "a too high conversion rate leads to hardly satisfiable pension demands at the expense of the younger generation".

The association has also criticised demands by the union to completely suspend all measures to bring pensionskassen back to full funding levels in the wake of the crisis. (See earlier IPE article: Expert supports full-funding holiday) 

"It is important now to judge each case individually and for each manager to assess the situation and take measures if necessary," noted Hanspeter Konrad, director of ASIP.

However, he warned pensionskassen should not be forced into taking measures through supervisory pressure.

He also pointed out further regulation regarding investments was unnecessary as diversification is still needed and claimed the prudent person principle ensures a prudent asset allocation.

The largest union, Unia, had demanded a complete ban on investments in vehicles such as structured products or hedge funds and argued the government should take on bad assets from pensionskassen.