Swiss pension funds are refusing to apply a ruling to limit the interest rates they apply to pension savings.
Switzerland’s occupational pension supervisor, Oberaufsichtskommission Berufliche Vorsorge (OAK BV), has warned that intense competition to attract members could lead funds to prioritise short-term financial gains over long-term stability.
In a note published last October, OAK BV said weaker multi-employer pension funds, defined as those with reserves to fend off market fluctuations of less than 75% of the agreed level, should apply a maximum 1.75% interest rate on pension savings.
Emmanuel Ullmann, chief executive officer of the pension fund for the canton of Solothurn (PKSO), told IPE this month that it is hard to plausibly explain a 1.75% accrual after a positive year for equity returns if the fluctuation reserves are not fully accumulated.
“I am against this OAK BV note. Together with the public-sector pension funds, we have ensured that this note does not apply to us,” he told IPE.
The CHF43bn (€47bn) public-sector multi-employer provider Publica has applied rates for its 12 pension funds of between 1.25% and 4% for 2025, citing a strong investment year and a solid financial position.
The CHF4bn multi-employer Pensionskasse Graubünden is granting 5.5%, a decision reflecting its robust financial situation and a positive investment year.
Profond, a provider for the SME sector with CHF17bn, is paying only 2.25%, citing legal requirements. It has filed a lawsuit against OAK BV’s interest rate regulation, stating that its board of trustees is the only authority with the power to set the interest rate, it said in a statement.
The debate on the interest rate granted by public and private pension funds has reignited after criticism from Inter-Pension – the organisation representing the interests of multi-employer schemes, accusing OAK BV that reducing interest rates would be at the expense of the members, in an article published in the K-Tipp newspaper.
OAK BV fights back
OAK BV denied that it is interfering across the board in pension funds’ decisions to the detriment of the members, the regulator said in a statement to IPE.
“This impression, however, does not correspond to the facts, and could undermine confidence in the occupational pension system.”
The regulator underlined that the annual rate cap does not apply to all funds, but exclusively to those operating in the open market that have set aside an insufficient amount of fluctuation reserves, below 75% of their target value.
The rule applies if there are risks to financial stability or the financial interests of the members, to avoid “wrong incentives” and the build-up of fluctuation reserves, OAK BV said.
The regulator applies the rule following cases, so far isolated, of pension funds operating in a competitive market attempting to gain short-term advantages by applying interest rates that were “disproportionately high” given their financial situation.
“Such practices can weaken the pension fund’s financial resources and shift risks to the members,” the regulator said.
OAK BV is tightening oversight on pension funds exposed to systemic risks, and expects all pension funds to set the interest rate on retirement savings responsibly, in line with their financial situation and risk capacity.
