Swiss pension funds’ average funding ratios recorded a “significant improvement” in the first quarter of this year, to a level close to the highest reached in 2021, on the back of financial markets’ gains towards the end of the year, and a positive start in 2024.

The average funding ratios of private pension funds went up to 119.6% in the first quarter of 2024, from 114.9% recorded at the end of last year, according to the latest Pensionskassen-Monitor published by Swisscanto.

The report showed that 71.9% of private pension funds in Switzerland now have a funding ratio of over 115%, up from 49.1% at the end of last year. Particularly fully-funded public pension funds have strengthened their funding ratios, compared with the previous quarter, all having reached the 100% mark, it added.

The average funding ratios of fully-funded pension schemes for Q1 2024 stands at 112%, up from 106.7% at the end of last year. Only 29.4% of the partially funded public pension funds have a funding ratio of less that 80%, compared with 44.4% in the previous quarter, according to the report.

The funding ratios of partially funded schemes reached 88.9% in the first quarter of the current year, from 84.9% at the end of 2023, according to Swisscanto.

Overall, almost all pension funds have now reached a 100% funding ratio, and only 0.2% remain underfunded, it added.

Swiss pension funds returned 5.8% in Q1 this year, boosted by stock markets’ 16.6% returns.

Investments in commodities returned 9.4% for the schemes in Q1, Swiss equities brought in 6%, foreign bonds unhedged generated 4.8%, and direct and indirect Swiss real estate returned 2.2%. Only foreign bonds recorded negative returns (-1%), the report showed.

Last year, the performance of pension schemes achieved “strong development” with a total return of 6.2%, the report added.

Looking for IPE’s latest magazine? Read the digital edition here