Swiss pension fund portfolios using Pictet’s BVG 2015 benchmark index returned between 0.11% and 0.48% over the course of 2015, according to the Swiss bank’s estimates.
The higher returns were achieved by the portfolios with a lower equity exposure of 25%, while those with a high allocation of 60% fared worse.
In 2015, Pictet – which has been calculating benchmark indices for Swiss Pensionskassen since the implementation of the mandatory system in 1985 – updated its index family for the second-pillar BVG, named after the law governing it.
The new index group for equity exposures of 25%, 40% and 60% introduced a more differentiated view on fixed income portfolios, including, for example, emerging market debt as a separate sub-asset class.
Further alternatives strategies and basic assumptions were also updated from the BVG 2005 index group.
Based on these older indices, Swiss Pensionskassen portfolios would have returned between 1.2% and 0.6% last year.
Irrespective of which index a pension fund benchmarked its asset allocation against, returns are most likely to be below 1% for 2015.
In mid-December 2015, the consultancies Aon Hewitt and Libera AG issued an updated version of technical parameters to be applied by Pensionskassen when calculating longevity risks.
The calculations for the update to the 2010 parameters were based on data provided by 15 large independent Pensionskassen.
They showed that life expectancy for 65-year-old men had increased by 0.8 years since 2010 to just under 20 years, and by 0.5 years for women of the same age to almost 22 years.
The consultancies have also updated the assumptions for Pensionskassen applying generation tables to calculate longevity risks.
The latter predict an even higher increase in longevity, especially for generations already in retirement or shortly before retirement – particularly for men.