SWITZERLAND - The government of the Swiss canton of Basel City has refined recovery plans for its civil servants fund PKBS, which will include a one-off payment of CHF 1.12bn (€730m).
While the canton will pay the sum immediately to get the fund to a full-funding level again by January 2010, fund members are facing contribution increases over the next 19 years to recover half that amount.
The proposal now to be approved by the regional assembly differs only slightly from the initial plan drafted by the PKBS' administrative board in May. (see earlier IPE-story: Basle City to plug pension hole)
Instead of basing the one-off payment on an extrapolated funding hole by year-end 2009, the government wants to schedule a CHF1.12bn payment, which is the amount the fund lacked at year-end 2008, and make an additional payment in December if necessary.
After plunging further in the first quarter the fund has indeed recovered slightly since January with a portfolio return of 3.2% year-to-date.
However, the funding level, which stood at 85.4% at year-end, still remains well below the 100% mark.
The one-off payment by the will be repaid equally by the canton and fund members. The canton noted it will use its reserves to pay its share of the debt.
Active fund members will see their contributions go up from 8.5% to 10.1% of their salaries while retired members will see no indexation on their pensions over the next few years.
This will be kept up until the fund members' share of the debt is collected. "This is expected to take 19 years," the canton noted in a statement.
Only in case of very positive market performance over the coming years will the contribution levels be cut again once the Pensionskasse has reached a 110% funding level.
The canton did not agree to the PKBS' suggestion to indexate pension again should they lose more than 20% of their purchasing power.
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