The Canton of Zurich Civil Service Insurance Fund (CSIF) has not been able to finance further reductions in pension contributions as politicians, aiming to reduce the financial burdens of the Canton of Zurich, were hoping. Last year it had been able to introduce reductions.
“Nothing has been possible this in this regard,” says Daniel Gloor, head of asset management at the fund. This was although assets exceeded liabilities at year -end by Sfr1bn (E), giving a funding level of 122%, compared to 120% in the previous year.
The fund’s investment adviser, Complementa recommended that the scheme increase its reserves for asset fluctuations substantially from 15% to 19% of assets, thus reducing the free assets to Sfr414m(SFr622m).
The increase in the fluctuation reserve is mainly due to lower interest rates, which have fallen below 3% for domestic bonds and to the higher volatility of stock markets. The standard deviation of the Swiss Market Index jumped to 34% in 1998; it normally is around the 18% mark.
Even though CSIF has a higher proportion of assets in stocks and foreign holdings, many Swiss funds with lower risk profiles are likely to have to recalculate their fluctuation reserves.