Pension scheme funding to tumble at top Swiss companies – Towers Watson
SWITZERLAND - The top-listed companies in Switzerland will see their pension schemes' funding levels tumble to 80% or lower by year-end, Towers Watson has predicted.
The consultancy looked at data for the 30 largest Swiss multinational companies in the Swiss Leader index (SLI) and concluded 2010 was "a good year", with funding levels reaching almost 90%.
However, already for the end of September, Towers Watson forecast a major drop in funding levels for SLI pension plans.
Peter Zanella, chief executive at Towers Watson in Switzerland, said: "A large reduction in the funding ratio of about 10% (per September) should be expected."
He said this was caused mainly be recent turbulence in the financial markets, as returns on plan assets were negative, and to a reduction in discount rates, which would lead to increased liabilities.
"Therefore, the funding levels may be lower than at the end of 2008 at the height of the last financial crisis," Zanella said.
Over the previous year, SLI companies had still seen their assets grow by 2.3% to CHF144.5bn (€116.8bn), with investment returns on plan assets amounting to about 6.5%.
Towers Watson said this return was "slightly higher" than its estimate of 4.9%, adding that the strength of the Swiss franc had dampened the increase in plan assets.
Without the currency losses due to the appreciation of the Swiss franc, plan assets would have been CHF6.5bn higher, according to Pascal Wyer, pensions expert at Towers Watson.
In 2010, hearing-aid maker Sonova (100.3%), agribusiness company Syngenta (99.9%) and automation technology company ABB (96.5%) had the highest funding levels.
Wyer pointed out that the average SLI funding level was higher than that of Fortune 1000 companies at 83% or DAX companies at 66%.
In other news, Swisscanto presented an update to its Pensionskassenmonitor to the end of the third quarter, reporting a 2.1% loss for the first nine months.
Together with pressure from currency markets, this led to a funding level of 100.3% for private funds, 2.3 percentage points lower than in the previous quarter.
Public funds saw their funding levels drop by 2.8 percentage points to 88.2%, bringing the average for all funds down from 97.4% to 94.7%.
The number of underfunded private Pensionskassen has tripled since the start of the year to 37%, while the share of underfunded public Pensionskassen has only increased slightly to 79%, according to Swisscanto's calculations, based on its own survey and the Complementa Risiko Check-Up.
Meanwhile, Credit Suisse, too, has published third-quarter figures for its Pensionskassenindex, showing a loss of 2.67%, adding to an already negative half-year result.
Credit Suisse pointed out that September was the only month with a slightly positive result of 0.24%.
Foreign equities (-1.86%), Swiss equities (-1.5%), liquidity (-0.47%) and alternatives (-0.06%) were the main contributors to the negative return over the period.