Positive returns on equity investments have boosted the average funding ratios of Swiss private pension schemes in Q2 this year to 113.6%, from 112.5% recorded in Q1, according to the latest Pensionskassen-monitor published by Swisscanto.
Year-to-date Swiss equities returned 8.2%, and world equities 10.6%. The average funding ratios of private pension schemes had dipped from a record level of 122.1% at the end of 2021 to 110.1% at the end of last year.
The funding ratios of fully funded pension schemes saw an uptick from 104.7% in Q1 to 105.7% in Q2 this year. The funding ratios of partially funded schemes also progressed to 84% in the second quarter of this year from 83% in the first quarter, according to the report.
Swisscanto’s analysis also showed that 45.6% of private pension funds (27.2% for the previous quarter) and 13.5% of public pension funds (8.3% for the previous quarter) have now a funding ratio of more than 115%.
According to the report, 1.3% of private schemes (9.2% for the previous quarter), 8.1% of fully funded public pension funds (22.2% for the previous quarter), and 88.9% (previous quarter 87.5%) of partially funded schemes recorded (87.5% for the previous quarter) were underfunded.
Pension schemes returned 1.43% in the second quarter of this year, with Swiss bonds (3.6%), bonds hedged in Swiss francs (0.7%), direct and indirect investments in Swiss real estate (1.2%) contributing positively to their overall performance so far this year, the report added.
Instead, returns on investments in commodities plunged to -10.9%, hedge funds recorded -1.4%, and unhedged bonds -1.9%.
BaFin lays out approach to classify investments according to SFRD
The German financial supervisory authority, BaFin, has published a note on the approach life insurance companies, Pensionskassen and Pensionsfonds should take to classify information on financial products within the framework of the EU’s Sustainable Finance Disclosure Regulation (SFDR).
BaFin sent out the note following a consultation on the matter because the SFDR does not contain any detail on how to deal with the products of German ‘classic life insurance’, it said, adding that these kinds of agreements have a collective protection mechanism for members through guarantee assets deployed in case of insolvencies not seen in other countries in Europe.
German pension funds and insurance companies invest assets both for non-unit-linked products or ‘classic life insurance’ products, assets that in turn are largely set aside in case of insolvencies.
BaFin has therefore developed a ‘one-to-one allocation’ approach, with assets classified according to type and volume, and assigned to a specific financial product for which additional information must be disclosed in line with Article 8 or 9 of the SFDR, it said.
It has also laid out steps to disclose information on the classification of certain products or group of products according to Articles 8 to 11 of the SFDR.
Pension funds can use the approach for investments in new financial products in the form of a ‘classic life insurance product’ or in the form of a hybrid product, a mix of ‘classic life insurance’ and unit-linked.
Pensionsfonds can set up separate guarantee assets for products for which additional information must be disclosed in accordance with Article 8 or 9 of the SFDR, therefore it is not necessary to apply BaFin’s request, the regulator said.