The funding ratio of the PK SBB, the pension fund for Swiss federal railways, has continued to progress reaching a record high of 112.4% in 2021, from 108.5% in 2020 and 105.4% in 2019, according to the Pensionskasse’s unaudited results.

The scheme has already taken into account the creation of reserves to cushion the decision to reduce the conversion rate used to calculate pension pay-outs from January next year.

The conversion rate will drop from 4.72% to 4.54% for members who turn 65 in 2023 and the implicit promised interest rate is reduced from 1.75% to 1.5% as a result of the on-going period of low interest rates.

The retirement assets of all active members will be increased by 4% as of 1 January next year to compensate for the lower conversion rate on the expected pensions.

PK SBB returned CHF786.9m (€752m) on investments, achieving in the last financial year total returns of 4.2%, above its benchmark by 0.2%, it said.

The pension fund allocates 42.8% of its total assets to Swiss fixed income, 19.8% to bonds denominated in foreign currencies, 12% to real estate, 11% to foreign equities, 4.9% to Swiss equities, 5.7% to alternatives and 3.8% liquidity, as of the end of December last year, it added.

Assets under management continued to rise over the years from CHF18.4bn in 2019 to CHF18.9bn in 2020, to reach CHF19.3bn last year.

The 4.2% returns achieved in 2021 represents an improvement compared with the 3.9% figure in 2020, a year shaped by investment market turbulence, but it is below the 8.9% recorded in 2019.

PK SBB considers, however, the performance achieved last year satisfying in light its low equity allocation compared with other pension funds, it said.

The lower equity investments allocation is the consequence of a high number of pension beneficiaries and the associated lower risk capacity of the pension fund, it explained.

After seeing the positive performance, the Pensionskasse’s board of trustees has decided to pay an interest on the active members’ assets of 2.5%, above the minimum interest rate of 1% set by the Federal Council.

The PK SBB fund said last year it would expect low returns in the coming years, therefore the board of trustees had reduced the technical interest rate for the valuation of pension obligations from 1.5% to 1%.

PK SBB caters for close to 56,000 members, including 44% retirees. It will publish further information on its returns for the 2021 financial year in its annual report in April.

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