The BVK has warned members against taking unrealistic “bait offers” of higher conversion rates at rival pension providers, as the pension confirmed that some authorities in the Swiss canton of Zurich were leaving the scheme.
The full extent of upheaval at the CHF29bn (€24bn) scheme will not come to light until it releases its 2016 annual report, but it will be enheartened that several regional authorities and other entities have voted to stick with the cantonal pension fund.
A debate has raged in recent months over the BVK’s decision to slash a number of technical parameters, such as the conversion rate (Umwandlungssatz) and the discount rate (Technischer Zins), exposing members to an average 8% pension loss.
While some pensions experts have argued that the BVK made a “brave” decision in a difficult market environment, several unions and other worker representatives deemed it “theft” and a step towards “dismantling” the scheme.
Thomas Schönbächler, chief executive at the BVK, pointed out that “many authorities have already voted to stay”, although he acknowledged others were still deliberating.
The municipality of Erlenbach, for example, with 75 employees, was the most recent to vote to leave the BVK, while the university of Zurich, with 4,500, decided to remain.
Schönbächler said the BVK had investigated many of the offers being made by other providers and warned its members against falling for their “bait offers”.
“These offers are often based on unrealistic assumptions, or compare apples with oranges,” he said.
“Many pension funds are offering high conversion rates to get new clients, which means the providers are knowingly accepting losses when people are retiring. This has to be paid by the active members, who have to accept lower interest rates on their assets.”
He added: “For people retiring during the period where a high conversion rate is guaranteed, this can be an advantage, but all younger workers are better off paying higher contributions now.”
Increasing contributions from employers and employees was part of the BVK’s strategy to make funding more sustainable and avoid cross-financing between active and retired members in the future.
Other pension funds, such as that of Credit Suisse, have made similar adjustments to technical parameters.
But while company pension funds have only to convince their own employees of the efficacy of these measures, the BVK faces competition.
Since many cantonal pension funds were transformed from subsidiaries of regional authorities into independent entities from 2014, they have been able to offer their services on the open market.
But that also means members now have the right to leave cantonal pension plans and choose other providers.