Switzerland’s Aargau mulls switch to DC
SWITZERLAND – The Aargauische Pensionskasse, or APK, is planning to change from a defined benefit to a defined contribution scheme by 2007 due to interest-rate pressures.
The change will bring with it financial benefits and relief for public authority pension funds, such as APK.
Speaking from Switzerland, managing director Susanne Jaeger said: “A defined contribution scheme may not be an advantage for the insured person, but it is an advantage for institutions such as ourselves.”
She explained that APK has been suffering the effects of the difference between the minimum guaranteed interest rate and market rates.
“The change means that we will no longer have to pay the difference between interest rates on the market and interest rates that we credit the insured.”
The earliest time that the change will occur is in January 2007. According to Jaeger, “This is mostly the will of political parties that we need to change from one scheme to another.”
APK – which has a solvency ratio of 75.6% - is currently in talks with employees and other affected parties. Thereafter it will go for legislative discussion.