SWITZERLAND - Most Swiss underfunded pension schemes chose to cut or abolish indexation above the legal minimum but only 40% changed their asset allocation as a result of the crisis, Hewitt Switzerland found in a survey.
According to its latest local pension fund survey, 67% of the 168 Swiss retirement schemes which took part were underfunded at the end of 2008, but only 20% had fallen below the 90% funding level. (See earlier IPE story: Row over Swiss funding levels)
At least 58% of underfunded schemes told the pensions supervisor that future returns from their portfolios would be sufficient to return to full funding within five to seven years, the consultancy pointed out.
Those funds are not required to present recovery measures but some did nonethetheless.
The ‘measure of choice' was a cut in indexation above the minimum level for the next year, as chosen by 64% of the Pensionskassen.
The next strategy chosen only by 40% was a review of the asset allocation.
"This is surprising as the deterioration of the funding level will have led to a reduced ability for all Pensionskassen to take investment risks," explained Hewitt.
"It seems that most trustee boards were convinced they should choose a long-term oriented asset allocation [strategy] before the crisis which did not need to be changed in the event of a worsening of the economic situation."
In 40% of cases, employers chose to support the pension fund either with direct payments or by giving up their right to access certain reserves in the pension fund. (See earlier IPE story: CHF350m needed as special payment from Swiss employers)
Only 21% of underfunded schemes chose to levy additional contributions.
Hewitt also looked other themes within the Swiss second pillar as part of its survey, including the ongoing shift from DB to DC-styled plans.
The consultancy said the number of pension plans offering their members a choice of asset allocations had decreased dramatically from 8% to 1% since 2007, when the survey was last carried out.
Hewitt believes the reason for this drop is Swiss legal regulations on this free choice amount to a full capital guarantee for pension fund members, which can be hard to fulfil.
Meanwhile, official statistics by the government were released which state that at the end of 2008 only 47% of all Pensionskassen were underfunded and that by the end of October 2009 this figure had decreased to 32%.