Basle’s embattled pension scheme set for 2008 bailout
SWITZERLAND - Basle's planned bailout of the CHF7.9bn (€4.8bn) pension scheme for its employees should go ahead from 2008 after the terms were sanctioned on Friday by a special committee.
The scheme, known as Pensionskasse Basel-Stadt (PKBS), has suffered from chronic underfunding since 2000 and its current deficit, which stems in part from the equity crash earlier this century, currently totals CHF1.3bn.
A year ago, Basle's government announced it would fully fund PKBS but only on the condition that following the move, the scheme's state guarantee be dropped.
To cushion the blow, the government presented a bailout plan that did not envision a switch to defined contribution from defined benefit for PKBS. The recent shoring up of other battered public schemes, notably the CHF33bn federal fund Publica, has involved switches to DC.
Nonetheless, the more than 20,000 civil servants who contribute to PKBS are to provide half of the CHF1.3bn needed to fund it while Basle's government is providing the other half.
In sanctioning the bailout plan, the committee said the government had already provided CHF364m. Unless a national referendum is held, the bailout can begin from January 1, 2008, the committee added.
In a related development, PKBS said it ended 2006 with a return of 6.7% on assets - right on par with other Swiss pension funds.
Partly because of the good performance, the scheme's funding ratio improved slightly to 78.6% in 2006 from 78% in 2005.
In terms of its asset allocation, PKBS said it had 31.9% invested in equities, including 18.9% foreign and 13% Swiss. Fixed income allocations were 35.7%, with nearly all to Swiss franc-denominated bonds.
PKBS also said its exposure to real estate totalled 15%, with nearly all of that to local properties. Liquidity totalled 6.7% and there was no exposure to alternatives.