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BPK under pressure to make DC switch

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SWITZERLAND - The public pension fund of the Swiss canton of the capital city Bern, Bernische Pensionskasse (BPK), is under pressure from member companies to speed up its move away from a defined benefit (DB) scheme to a defined contribution (DC) arrangement.

Several institutions from the health and care sector have indicated that they are considering leaving the CHF8.9bn (€6.24bn) BPK due to its DB structure, which they describe as “no longer affordable and too inflexible”, it was revealed in the pension fund’s annual report.

“This would have considerable negative effects on the BPK,” the fund said.

BPK has been negotiating a switch to a more DC-like structure with guarantees, since before the onset of the global financial crisis (see earlier IPE-story: Swiss canton faces dear DB/DC change).

The funding level of the BPK deteriorated from 109% in 2007 to 88% in 2008, but the ratio has since recovered to 91.8% at end-March 2010.

Given the good development of the capital markets last year - the fund reported a 12.2% performance compared to -13.1% for 2008 - the fund decided against levying additional recovery contributions from the members (see earlier IPE-story: BPK scraps additional contributions).

Since year-end 2009, the fund has returned 2.8%, having maintained an asset allocation of approximately 37% equities, 44% bonds and 3% real estate, with the balance held in cash.

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