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IPE special report May 2018

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CSIF independence shelved

The continued coverage deficit at the CHF16.95 bn (e11bn) Canton of Zurich Civil Service Insurance Fund means its planned independence has been postponed, possibly for years.
The scheme reported that a return on investments of 7.1% in 2003 saw its coverage ratio rise to 90.9% from 88.1% in 2002.
“The deficit coverage does mean, however, that the planned independence of the CSIF, which had been decided by the Cantonal Council in February 2003, must again be postponed, as this may only be realised when the coverage rate is over 100%,” said senior government officer Christian Huber in the plan’s 2003 annual report.
The CSIF had planned to make the transition to a private trust as of January 1 this year. Huber said the deficit meant that the fund had to “considerably adjust its risk profile and correspondingly reduce the equities quota”.
The scheme cut equities investments by about seven percent to 26% of its portfolio and money market investments increased from 10.1% to 22.7% of the portfolio.
“For this reason, completely reducing the coverage deficit will take its good time even if financial markets continue to show sustained growth,” Huber said.
“The investment strategy has been duly adjusted following an extensive process of evaluation undertaken by the CSIF, the actuaries and the controller,” the report said.
Given current assumptions and investment strategy, the CSIF estimates it will take eight years to achieve a 100% coverage rate.
Huber he said there is “no cause for alarm” for the insured and pensioners. “The CSIF has no liquidity issues and is readily capable of meeting on-going obligations.”
The scheme has 59,752 insured participants and 19,581 pensioners.

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