Swiss pension funds are opting to increase interest rates on the pension savings of their members, a sign that returns and the overall financial situation of the schemes has improved over the past year.

The board of trustee of the pension fund for the city of Zurich (PKZH) decided at a meeting in December to apply an interest rate on pension savings of 4.5% for 2024, the highest level since 2007 (7%), and up from 2.5% in 2023.

This level of interest rate is necessary for members to reach a payout equal to 60% of their last insured salary when they retire at the age of 65, and it is well above the minimum interest rate of 1.25% set by the Federal Council, the scheme said.

PKZH will not increase pensions in the coming year because the level of inflation is not high and fluctuation reserves are not at least 90% full, it added.

Migros Pensionskasse (MPK), the pension fund for the Swiss retailer, said it has enough funds available to apply an interest rate on members’ pension savings of 3.5% this year, 2.5 percentage points above the minimum interest rate of 1.25%, and up from 3% last year.

The scheme will use available funds to increase pensions by 5% as of 1 January this year, it added.

The board of trustees of PK SBB – the pension fund for Swiss federal railways – has decided to use its assets to set the interest rate on savings at 2% for 2023. It has also decided to apply an additional interest rate of 0.3% as members receive a one-off additional payment, with inflation affecting the assets of those employed. The interest rate therefore totals 2.3%.

Last year, PK SBB calculated an interest rate cut implicit in the conversion rate used for pension payouts from 1.75% to 1.5% still affected by a low-interest-rate environment.

Publica, the largest Swiss pension fund, is also slightly increasing interest rates on savings to 1-1.50% in 2023.

Stiftung Auffangeinrichtung BVG, or Foundation Institution Suppletive LPP,  a non-profit organisation whose members are employers and individuals, has increased the interest rate on vested benefits from 0.01% to 0.30%, it said.

It is also granting an additional interest of 0.50% on mandatory second-pillar pensions for 2023. The total interest rate therefore goes up to 1.50%. An additional interest of 1.40% is applied for non-mandatory retirement savings, with the total interest rising also in this case of 1.50%. It has set a 1.25% interest rate on second-pillar pensions for 2024.

The multi-employer pension fund Asga Pensionskasse, though, will reduce the interest rate this year to 1.75% from 2.25% last year, deploying a total of CHF263m to pay interest on pension savings, it said.

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