Switzerland’s occupational pension supervisor, the Oberaufsichtskommission Berufliche Vorsorge (OAK BV), is tightening oversight of pension funds exposed to systemic risks that could undermine their financial stability.
In a note circulated in December, the authority set out instructions contained in directive W-01/2025, which entered into force on 1 January. The directive requires cantonal and regional supervisory authorities to carry out a comprehensive assessment of financial and non-financial risks for the pension funds under their supervision.
OAK BV now expects a “structured assessment of financial risks” that takes into account pension funds’ assets and liabilities, changes in membership structure, and other key factors, the supervisory authority told IPE in a statement.
“At least the financial situation (funding ratio), ongoing funding, restructuring capacity, investment strategy, and risk tolerance must be examined,” the statement added.
The latest note supplements an earlier directive aimed at ensuring cantonal and regional supervisors apply uniform methodological principles. It recommends the use of tools for the systematic assessment of financial risks, which should be regularly reviewed and further developed.
Under the guidelines, risks are assessed more granularly by examining the economic funding ratio, based on a market-based valuation of liabilities using uniform parameters, as well as the ability of members and employers to contribute to restructuring measures.
Supervisors are also instructed to conduct stress tests across individual asset classes.
New forms of digital analysis, including data-based evaluations and potentially AI-supported methods, can also support risk assessment processes, the regulator said.
‘Acute risks’ at multi-employer funds
Financial risks are analysed in detail at an aggregated level in OAK BV’s annual report on the financial situation of pension funds. However, the authority said risks are “particularly acute” at Swiss multi-employer pension funds operating in a competitive market.
“In these cases, the risk is that the governing body may grant excessively high interest rates to increase the attractiveness [of a pension fund for potential members], without simultaneously accumulating sufficient reserves to absorb market fluctuations,” OAK BV said in the statement.
The regulator has previously warned against improving benefits by applying high interest rates on retirement assets, a stance that has been rebuffed by parts of the occupational pension industry.
Global and domestic pressures
Investment performance remains a key factor when setting the interest rate applied to retirement savings. Future financial market developments are seen by multi-employer pension funds as one of their biggest investment challenges, according to a study by the Institute of Financial Services at the University of Lucerne.
The study cited global shifts such as US government tariff policy, declining interest rates and regional armed conflicts as key concerns. By contrast, growth and competition were not viewed as particularly relevant challenges by the funds surveyed.
Domestically, however, OAK BV warned that intense competition to attract members can lead funds to prioritise short-term financial gains over long-term stability.
Multi-employer pension funds cover around three-quarters of active members, often have complex structures, and more frequently face conflicts of interest within their governance arrangements, the regulator said.
“Moreover, strong growth can lead to a dilution of reserves to absorb market fluctuations, which can further compromise financial stability,” it added.
Pension funds also face governance-related risks more broadly, with OAK BV highlighting issues such as legal transactions with related parties as part of its supervisory focus.
