The funding ratio of Swiss pension funds swung back almost to last year’s level in September at 110.2%, according to the latest figures released by the federal pensions regulator Oberaufsichtskommission (OAK BV).
Schemes’ funding ratios peaked at the end of 2019 to 111.6%, only to experience a sharp fall in March to 102% caused by strong market corrections triggered by the COVID-19 pandemic, the regulator said.
The main drivers of the positive development since the peak of the pandemic in April have been equities and real estate returns.
Equities saw a “strong recovery”, OAK BV noted, from -18% in March to -1.6% at the end of September. Real estate returns improved from -5.4% at the end of March to -0.9% at the end of September.
According to OAK BV, bonds underwent only minor fluctuations, from -1.2% at the end of March to 1.6% at the end of September, while the performance of alternative investments stood at -4.5% for the same period.
The pension regulator warned, however, that the financial stability of Swiss pension funds in the medium-term remains “challenging”.
The number of underfunded pension institutions reached 67 at the end of September, up from 24 at the end of last year but down from 286 in March and 101 in June.
At the end of September, the share of underfunded pension funds was 7.5% weighted on assets. This means that 7.5% of pension obligations are currently no longer 100% covered.
The situation has improved significantly compared to 45.7% at the end of March, or 10.2% at the end of June, but the share of underfunded pension funds based on weighted assets was still above 1.1% as recorded at the end of 2019.
OAK BV analysed the data of 1,342 pension institutions, with total assets worth CHF762bn (€707bn). It took into account the individual investment strategies of the pension funds and market developments.