Swiss SMEs embrace change
In Switzerland, many small and medium-sized employers are turning their backs on the traditional insurers as pension providers. Instead, they are putting their staff pension provision in the hands of autonomous multi-employer pension funds.
Pensionskasse Pro and Stiftung Abendrot - two Swiss pension funds catering for small to mid-size enterprises (SMEs) have seen big rises in business volume. "Many businesses are changing over to autonomous multi-employer Pensionskassen, and out of the multiemployer schemes offered by insurance companies," said Hans Ulrich Stauffer, managing director of the Basle-based Stiftung Abendrot, which specialises in socially responsible investment.
At the end of 2005, Pensionskasse Pro had acquired around 1,500 firms, it said, nearly three times the number it had the year before. Stiftung Abendrot, meanwhile, saw the number of firms under its wing rise 16% to 970 in the same year. The number of insured rose even more strongly at 33.These corporate sponsors have simply had their confidence in the insurers shattered, said the Stiftung Abendrot spokesman, and are disatisfied with the poor conditions they get from the insurers, such as the minimum interest rate (Mindestzins) and the pension conversion rate (Rentenumwandlungssatz).
The minimum interest rate for mandatory saved pension capital in occupational pension plans is set by the Federal Council in Switzerland, and at the moment, it is just 2.5%. The pension conversion rate is the percentage used to calculate the annual BVG old-age pension. BVG is the federal act which regulates occupational pension plans for employees.
One of the most important points about multi-employer Pensionskassen such as Stiftung Abendrot, the spokesman said, is that the profits are divided in a transparent way. This is not the case with pension plans run by the insurers. "Where the profits go in good years is not transparent," he said. Pensionskasse Pro, whose asset allocation is based on a model developed by Swiss private bank Pictet, invests 55% of assets in fixed income, with 45% of that in Swiss francs. The equities portion is 25% and the remaining 20% is invested in real estate assets. Stiftung Abendrot invests 39% in bonds - 23% of which is in Swiss francs - 18% in equities, 38% in real estate and the rest in alternatives and cash. In 2005, Stiftung Abendrot's assets rose 47% to CHF470m (€303m). At Pensionskasse Pro, assets more than doubled to CHF442m, and was slightly overfunded with a coverage ratio of 101.1%.