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Lausanne pension gap needs CHF350m bridge

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SWITZERLAND - The Swiss city of Lausanne has proposed a CHF350m (€235.4m) injection for its ailing CHF1.09bn Caisse de Pensions de la Commune de Lausanne (CPCL) pension fund.

In a communiqué, the municipality suggested it will inject CHF290m - part of which would become an interest-bearing loan - while the rest will come from other affiliated organisations, such as the public transport firm.

The city wants to raise the fund's cover ratio through the move, as it had dropped below 40% from its usual average of 45%. The legally required minimum by 2012 is 60%.

The fund, which in 2007 saw the cover ratio increase to just above 45% following the effects of structural changes decided in 2004, said its cover ratio declined because of the credit crunch.

Lausanne, which said it would not increase contribution rates, intends to finance most of the injection via the sale of buildings and grounds of the city.

A cash contribution of CHF150m in the form of a  30-year loan with an interest of 4%.

The fund expects a parliamentary decision on the contribution by June this year.

The news comes as Swiss pension funds have hit a history low. (See earlier IPE story: Swiss funds hits historic low)

Preliminary calculations for the Credit Suisse Pensionskassenindex showed yesterday the Swiss Pensionskassen posted a negative return of 13% for the full year 2008.

The Federal Swiss Insurance Office last week estimated around half of all Swiss schemes are currently underfunded as, on average, they need a 4% annual return just to "keep their cover ratios constant".

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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