IMF warns Swiss guarantee is at risk
SWITZERLAND - The International Monetary Fund (IMF) said it doubts that Swiss life insurances have enough buffers to continue guaranteeing a 4% annual interest rate on pension funds.
"Life insurance companies play an important role in funding of the 'second pillar of the mandatory pension scheme. They are required to guarantee an interest rate not less than 4% per year on those fund," an IMF staff team noted in the most recent "Detailed Assessment of Observance of Financial Sector Standards and Codes on Switzerland".
The team therefore concluded: "In light of the recent deterioration of investment performance, it appears unlikely that investment income of the funds will sustain this guarantee. If this rule is not amended, the insurance companies involved must be required to establish deficiency reserves."
Other observations made by the IMF assessed the publication of statistical and other data by the Swiss supervisory authorities.
One point of criticism raised was aimed at the Federal Office of Social Insurance (BSV), which supervises pension funds acting on a national and international level as well as overseeing over the regional supervisory authorities.
The BSV is currently publishing its annual report with a two-year delay but the IMF recommended "it would be advisable that the FOSI annual report be published in a more timely fashion".
Furthermore, the IMF would like to see "more frequent and timely disclosure of statistics of the pension system" as well as the annual reports posted on the various supervisors' websites.
The IMF noted that the authorities have been "in agreement with the assessments".
The report also noted that there are discussions about the possible creation of an ombudsman within BSV "with responsibility for consumer protection related to private pension funds".
The report also mentioned plans by the BSV to get the supervisory law revised in order to strengthen its "high surveillance role as well as its role in the direct supervision of pension funds."
However, plans on a reform of the supervisory structures have been on the authorities' agenda for several years now. (See earlier IPE story: Swiss gov't looks abroad for supervision)
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