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IMF finds fault with Swiss pension controls

SWITZERLAND - The International Monetary Fund has urged the Swiss government to centralise regulation of Swiss pension funds (Pensionskassen), noting that it would be an effective way of improving the current system.

"Pension fund supervision across (Swiss) cantons remains fragmented and uneven and should be upgraded. Moving toward a centralised approach could provide benefits, including economies of scale and uniform supervision and enforcement," the IMF said in a new report on Switzerland.

"The authorities should also consider introducing risk-based funding requirements and strengthening integrity regulations," the IMF added.

The IMF's report comes less than a week after the government in Bern said it was planning several new measures to improve regulation and corporate governance of the Pensionskassen.

Several recent scandals at Pensionskassen, including the well-reported Swissfirst affair, have finally prompted Bern to take action on this front.

Although details are still sketchy, the measures are to include a ban on "parallel running" - where pension fund managers trade the same shares as the pension funds that employ them.

The government also wants to create an independent national regulator, though it stressed that supervision of the schemes would still primarily rest with Swiss cantons.

Regarding the IMF report, Swiss Pensionskassen lobby ASIP said it was strongly against the call for centralised regulation of its members. "The fact is that the idea is unworkable. We believe effective supervision of the schemes is best achieved by the cantons as they are close to them and know them well," said ASIP managing director, Hanspeter Konrad.

According to Konrad, ASIP likes what it has heard so far from the government regarding Pensionskasse regulation. "We back the two-layer approach, as the responsibility for supervising the schemes remains, in the first place, with the cantons. The proposed regulator would act as a back-up," he told IPE.

ASIP also believes that what is needed is more widespread implementation of a best practice code that it developed for its members in 2000. Last September, ASIP admitted that only 10% of the 3,000 Pensionskassen had bothered to adopt it.

On a related issue, the IMF report said that while the funding of Swiss Pensionskassen had improved, "aggregate coverage is not yet adequate, especially in some public sector funds".

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