SWITZERLAND - The financial crisis should be seen as a chance to amend the Swiss pension system, delegates at a retirement provision conference in Zurich have been told.
Monika Bütler, from the University of St. Gallen, told delegates at the conference organised by university researchers and the Sustainability Forum Zurich that while the crisis has brought problems for the pension industry it also brought to light major shortcomings of the system which led to heavy underfunding in many Pensionskassen, but which can be rectified.
She argued the pension promises made so far had been much too great compared with the contributions and described the system as being like an insurance policy without premiums being paid.
Bütler suggested the conversion rate used to calculate pensions would be much lower today had it been indexed to life expectancy over the last 20 years or, conversely, the retirement age should be higher.
Both steps were among her suggestions for reforms to be put in place in the wake of the crisis, while other amendments to the system should include higher mandatory reserve levels in the pensionskassen, according to Bütler.
Heinz Zimmermann, from the University of Basel, agreed that reserves were too low in Switzerland and argued the more general problem was promises had been made by the state which cannot be kept by the capital markets.
He argued that a funded pension system could not uphold certain security features, such as guarantees, as demanded by the state.
One example he gave was the regulatory requirement of virtually constant full-funding which led to "ill-times equity sales" and other rash investment decisions.
According to Zimmermann, many of the securities offered for today's members will endanger the sustainability of the system for future generations.
In his speech, the head of the Swiss pension fund association ASIP, Hanspeter Konrad, dismissed calls by the unions to maintain current contribution levels to pensionskassen, rather than increase them.
He said getting funding levels back up would strengthen the system but unions fear that higher contributions will hurt companies during the current crisis. (See earlier IPE story: Swiss pension level breaches constitution - union)
Consultant Andreas Reichlin, from ppc Metrics, also claimed while diversification will remain a key strategy in investing, the financial crisis has unveiled "'unreal' asset classes".
Hedge funds, private equity, convertibles, corporate bonds and structured products are said to fall under this label because they were insufficiently uncorrelated to equities, as Reichlin stressed not the number of asset classes used was important but their correlation.
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