SWITZERLAND - The CHF7.9bn (€5.2bn) Bernische Pensionskasse (BPK) has reviewed its recovery plans and will reduce its interest rate paid to members from January, just as regular contributions will rise.
The fund had announced earlier this year it would need to increase contributions by 2.2% and raise additional recovery fees of 3.5%, shared between employer - i.e. the Swiss capital of Bern - and employees.
However, those plans were opposed by the canton’s regional government. (See earlier IPE story: BPK recovery goes back to drawing board)
“The administrative board has re-evaluated the situation and has decided not to levy additional contributions at the moment,” the fund announced in a statement.
The funding level is said to have increased to 92% by August (from 87% at the end of 2008) with the help of a 8% positive return in the first eight months of this year.
However, the fund noted it will have to lower the interest rate for the assets from 4% to 3.5% and this in turn makes it necessary to increase regular contributions by 2.2%, shared between employer (1.4%) and employee (0.8%).
“The asset allocation strategy will be continued unaltered,” the fund further stated, although the regional government still has to agree to the announced measures.
The BPK believes in its 38% equity exposure and “in the principle of buying when prices are low and selling when prices go up,” said Hans-Peter Wiedmer, chief finance officer at BPK.
The rest of the assets are invested in bonds (over 50%), along with real estate (around 3%) and cash, but the fund has no alternatives.
According to the fund’s administrative board, the financial situation of the BPK will be reviewed again once the accounts for 2009 are available.
At that point in time, the board will also discuss whether or not to accept a temporary state guarantee for the fund as offered by the regional government.
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