Switzerland’s occupational pension supervisor, Oberaufsichtskommission Berufliche Vorsorge (OAK BV), has proposed comprehensive legislative changes to strengthen the identification of systemic risks in the pension sector as consolidation accelerates.
On 3 July, the supervisory authority published a position paper calling for legislative changes in five areas in response to the continued growth of multi-employer pension funds (Sammel- und Gemeinschaftseinrichtungen).
According to the paper, legislative changes are needed to strengthen OAK BV’s supervisory powers, improve the audit process for pension institutions and reinforce the independence of external oversight bodies.
OAK BV also called for a harmonised, risk-oriented supervisory regime to be enshrined in law with clear minimum requirements, alongside specific statutory rules for multi-employer pension funds covering governance, risk management, transparency and partial liquidations.
The proposed legislative changes are intended to align the legal framework for occupational pension supervision with the growing complexity of pension fund structures and clarify the roles and responsibilities of the stakeholders involved, OAK BV told IPE in a statement.
Clearer responsibilities and more precise legal requirements would reinforce the “effectiveness and consistency” of supervision and ensure the application of a uniform set of rules across Switzerland, ultimately enabling “the early detection of financial, organisational, and operational risks”, the statement added.
The regulator also said the ongoing consolidation of pension funds into larger multi-employer schemes increases the importance of “high-quality audits”.
According to OAK BV, a strengthened risk-oriented approach by auditors and independent oversight bodies would provide supervisory authorities with better information and enable the earlier identification of weaknesses in large pension funds.
New challenges
The growth of increasingly diverse and, in some cases, highly complex multi-employer pension schemes is creating new challenges for the supervisory authority.
In its paper, OAK BV said the financial position of Swiss pension funds remains solid overall, but the trend towards consolidation is increasing demands on supervision, governance and transparency.
The regulator argued that “specific legal requirements” covering governance, risk management and transparency are needed to address the growing complexity of multi-employer pension funds.
“This allows for better control over conflicts of interest, competitive risks, and uncertainties, while strengthening the protection of the members,” the supervisor’s statement added.
According to OAK BV, in an increasingly concentrated market, inappropriate incentives to market pension solutions can have significant consequences.
Clear legal rules governing broker remuneration would therefore improve transparency, reduce conflicts of interest and ensure decisions are more closely aligned with the interests of scheme members, it said.
Overall, the proposed legislative changes would strengthen the long-term stability of the occupational pension system and enhance member protection, according to the regulator.
OAK BV’s position paper follows a government-commissioned report, prepared with input from industry experts, assessing the structural reforms introduced in 2011 and 2012 to strengthen supervision, governance and transparency across Switzerland’s second-pillar pension system.
