The public pension fund for the Swiss canton of Basel-Land must now address its CHF2.2bn (€1.8bn) deficit after more than half of the cantonal population backed a proposal for it to be fully funded.
The plebiscite, announced in May, comes after Swiss public pension funds such as the 80% funded CHF5.9bn Basellandschaftliche Pensionskasse (BLPK) were instructed by the national government to put an end to state guarantees that allowed them to be in deficit.
As a result of Sunday’s plebiscite, which saw 51.7% of the population vote in favour of the Pensionskassengesetz proposed by the cantonal government, the BLPK will be fully funded by January 2015 at the latest.
The canton estimated that, of the CHF2.2bn deficit, most recently calculated at the end of 2012, CHF1.2bn would be paid for by the communes and participating employers.
The remaining shortfall would come directly from the canton.
However, to enable full funding as soon as the law is enacted, the canton will borrow the outstanding amount and allow the communes and employers to repay the loan in stages, only charging interest in line with the BLPK’s chosen discount rate.
Explaining the motivation to fully fund the scheme, documents outlining the government’s position ahead of Sunday’s vote noted that closing the deficit would ensure no cost would be shifted to future generations.
“It therefore ensures coming generations are free of any inherited liabilities,” the document said. “As the existing deficit would be closed in a single step, it would result in a one-time higher cash demand.
“This short-term effect is more than justifiable, as it would do away with the uncertainty over the development of the pension population that forms a considerable part of the risk in a partially funded system.”
The document also noted that the borrowing of the capital required to address the deficit would be done at a time when the current low interest rates made the measures more affordable.