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Lucenti, Swissca slam Swiss pension rate rise

SWITZERLAND – Switzerland’s decision to raise the minimum guaranteed interest rate for pensions from 2.25% has come in for criticism in new reports from Lucenti and Swissca.

Earlier this month the Swiss federal council decided to raise the minimum guaranteed interest rate for occupational pensions to 2.5% from 2.25% as from January 1 next year. The rate has been the subject of some debate in Switzerland.

“The increase from 2.25% has taken place too soon,” said Graziano Lusenti, who prepared Credit Suisse Asset Management’s latest survey of the Swiss institutional market.

He said it had come at a time when “already painful measures of reorganization” such as the abolition or reduction of indexation and the rise in contribution rates that have been put in place by pension funds.

“The decision contributes to intensifying the financial difficulties of the institutions for precaution still another little already minted. These difficulties result from a too high transformation rate, in view of the life expectancy.”

Meanwhile a separate report from Swissca and investment foundation Prevista said: “Pension institutions have little scope and the increase to 2.5% in 2005 does not at all respond to their needs.”

The Swissca report argues that Swiss pension institutions have not yet recovered from recent lower stock markets – and that the legal framework is complicating their recovery.

Swissca Pensionskassen-Studie 2004 is based on a sample of 180 pension funds managing a total of 185 billion francs (119.7 billion euros).

According to the study, conducted online between March and April, pensionskassen think the general legal framework does not correspond to reality and makes a recovery more difficult.

“The relatively high stock of shares is a consequence of the very constant investment strategy of the majority of pension institutions. They have persisted with their portfolios even during bearish market times,” the report says.

Swissca conceded that pension funds are now beginning to benefit from a recovery, but it says the recovery has not adequately filled their reserves.

Lucenti’s CSAM’s study claims that the expected performance in the second half of 2004 is just three percent, after a first-half performance of just two percent.

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