mast image

Special Report

Impact investing

Sections

Swiss pension scheme Publica to cut conversion rate

Related images

  • Swiss pension scheme Publica to cut conversion rate

Related Categories

SWITZERLAND - The Swiss public fund Publica - the 24th largest pension fund in Europe, according to IPE's Top 1000 Pension Funds survey - is set to lower its conversion rate from 6.53% to 6.15% in the wake of new longevity assumptions published by the government last year.

The change will take effect 1 July 2012.

Werner Hertzog, director at the CHF33bn (€25.7bn) fund, said: "We are probably the first ones to make this adjustment, but it is very likely others will follow."

The fund estimates the change will allow it to save as much as CHF90m per year.

<

The cut will be applied to all people retiring after 30 June 2012. For those already retired, buffers will be dissolved to ensure their pension will not be cut, Publica said.

In recent years, the fund had put aside CHF480m in buffers for a conversion rate cut and another CHF870m for adjustments to the longevity tables.

The conversion rate is used to calculate pension benefits during the payout phase. Last spring, it had been the topic of a heated political debate in Switzerland.

In a March referendum, more than 70% of Swiss voters decided against a further lowering of the minimum conversion rate to 6.4% by 2014 from the current 7% for men and 6.95% for women.

Prior to the crisis, parliament had already decided on an unchallenged cut in the conversion rate to 6.8% for both sexes by 2014.

However, as a lower conversion rate can be applied to assets from contributions beyond the legal mandatory minimum, the actual average conversion rate in the Swiss second pillar is already 6.74%.

"Only around one-fourth of our assets is for mandatory benefits," Hertzog pointed out for his own fund.

He added that Publica would not be the fund with the lowest conversion rate, as some funds already have lower rates.

"They have used different assumptions, but, obviously, they came to the same conclusion," he added.

Both the discount rate and the strategic asset allocation will be unaffected by this adjustment, Hertzog confirmed.

Unrelated to the conversion rate cut, the collective fund has split its portfolio into retirement schemes with active members and closed schemes that only have retired members.

Hertzog said: "It took some time to implement this step, but now we have different asset allocations for the two portfolios, as the liabilities are completely different."

For 2010, Publica reported a 5.1% return.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<