The board of trustees of Nest Sammelstiftung in Switzerland has decided to apply an interest rate on pension assets of 4.5% in 2021, up from 1.5% in 2020.
This is the highest interest rate of the last five years – Nest set a rate of 2.25% in 2017, 1.50% in 2018, 2% in 2019, and 1.50% in 2020.
Nest said the decision taken by the board to raise the interest rate on pension assets is based on the positive development on financial markets particularly between February and August last year.
The collective foundation recorded returns “once again” above the benchmark, standing at 7.8% as of September 2021, up from 4.08% in 2020 and below the 5.4% benchmark, according to Nest’s latest financial statement.
Returns in 2020 were driven primarily by equity investments especially in emerging markets (7.99%) and in developed markets (6.39%). Investments in Swiss real estate returned 6.59%, foreign bonds 3.88% and Swiss bonds 0.90%.
On the other hand, the Pensionskasse recorded negative returns for global real estate (-13.44%), infrastructure (-9.32%), insurance linked securities (-5.54%) and private debt (-3.90%), primarily due to the negative development of the US dollar, according to the statement.
Nest had a funding ratio (unaudited) of 116.8% as of the end of September last year, up from 111.3% recorded the prior year.
Asset under managements rose from CHF3.30bn (€3.16bn) in 2020 to CHF3.62bn in September last year, it said.
It allocates 24.6% of the assets in nominal values investments, 29.3% in equities, 21% in real estate, 14.5% in alternatives, 6.6% in bonds and 4% liquidity, the financial statement added.
According to its sustainability policy Nest excludes stocks Nestlé and Crédit Suisse from its investment portfolio, it said, adding that it invests instead in Roche, Novartis, UBS or LafargeHolcim stocks which make up the majority of its Swiss equities portfolio.
Nest also excludes from its inveastments companies producing arms, nuclear power plants, firms involved in corruption cases and child labour.
It is reducing the technical interest rate to discount future benefits to 1.5%, from 1.75% as of last September, as a result of uncertainties on investment markets. Nest is also cutting the conversion rate used to calculate pension pay-outs to 5.5% until 2024, from 6.1% in 2021, due to increasing life expectancy, low interest rates and the overall economic outlook.
It caters for 3,746 companies with 26,486 employees.