The lower house of the Swiss parliament, the National Council, has given the green light to a motion put forward by the social security and health committee (SGK-N) to scrap investment limits for Pensionskassen.
The National Council voted in favour of the initiative, previously rejected by the Federal Council, with 123 ‘yes’ votes against 65 ‘no’s’.
The Federal Council turned down the motion, in particular on the investment limits part, stressing the importance of the prudent investor principle. The government added in its remarks that the investment limits were particularly important for illiquid and leveraged investments.
The social security and health committee is pushing to improve risk management capacities at Pensionskassen to take into account specific risks and at the same time improve knowledge of green finance in investment activities.
As a result of the vote by the National Council, the Federal Council is now tasked with reviewing the Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV 2).
SGK-N is demanding the government review article 33 of the BVV 2 on the board of trustees, the supreme body of a pension fund. Article 33 should also include statutory requirements for the board of trustees of pension funds with regards to risk and asset management.
The article 50 of the BVV 2 on risk management and diversification should be supplemented with a more comprehensive set of rules on risk management. New rules on risk management would lead to considering specific risks of individual Pensionskassen while continuing to focus on risk diversification.
For the article 55 of the BVV 2 on thresholds for investments, instead, limits should be removed, the committee said. Pension funds have different risk structures, making strict guidelines unnecessary, the committee said in its motion.
The committee added that, especially in times of negative interest rates on government bonds and high fluctuations of equity markets, strict limits mean lower returns, a false sense of security on asset class allocations and removed responsibilities from pension fund boards.
SGK-N noted that changes towards increasing the risks on investments of pension assets have an “enormous potential”. If returns increase by only 0.6% per year with the same risk, the conversion rate used to calculate pension pay-outs could go down from 6.8% to 6%, for example.
Cutting the conversion rate to 6% is one area where there is a plan to reform the second pillar of Switzerland’s pension system.