The CHF15.6bn (€12.7bn) pension scheme of the Swiss federal railway has decided against introducing a variable pension payout model.

The pension fund was one of very few in Switzerland contemplating the controversial move towards a fixed basic pension, with bonuses to be paid out in times with good returns.

Markus Hübscher, managing director at the Pensionskasse SBB (PK SBB), confirmed to IPE that “for the moment” the pension fund will not be introducing flexible pensions.

He added the “main reason” for the decision was that the pension fund wanted to wait for the outcome of the political debate around the new reform package ’Altersvorsorge 2020’ which, among other matters, includes proposals to lower the legal minimum conversion rate.

A change of such a technical matter would help to avoid cross-financing between generations, those in favour of the change argue.

The PK SBB is now continuing the debate on lowering the discount rate for active members to 2.5%.

An additional measure might be to introduce so-called generation tables, which would pool the longevity risk for age-specific cohorts rather than sharing it across the fund’s entire membership according to year of birth.

“We expect those two measures to be introduced and a decision to be made by the end of the year,” Hübscher pointed out.

He also noted that “the introduction of three measures” would have been too much in a one-off move, hence the decision to postpone the introduction of the flexible pension model.

A local transport union welcomed the decision, releasing a statement titled “The wobbly pension is off the table”. It viewed the end of the plan as a victory for its negotiations with SBB as it had argued that flexible pensions would “shift all the risk towards scheme members”.

However, supporters of the measure note it would return some fairness between generations into a system where pensions cannot be cut while active members have to bear the burden of recoveries.

However, other pension funds are also sceptical when it comes to flexible pensions.

Francoise Bruderer, managing director of the CHF15bn PK Post, warned the introduction of flexible pensions was “misleading” at the current pension payout level.

She explained people will always expect the higher payout if you tell them their pension is going to be between 90 and 100.

“It is much more honest to communicate directly that the conversion rate has to be cut because of the demographic development and the uncertain situation on the financial market,” she pointed out.

Bruderer added this was the “difficult, but right way”.