SWITZERLAND - Pension schemes should not “lose their nerves” if funding levels drop below a certain level, according to a panel of experts at a discussion organised by B+B Vorsorge.

Stefan Kull, board member for a new pension fund management university course in Luzern, said: “Some pension funds are like ‘wild wasps’ as soon as the funding level goes below 100%.”

He said the issue of funding levels needed to be “demystified” and the system adapted.

“Pensionskassen should not lose their nerves if they get underfunded, but neither should they accept a continuous deterioration of the funding level without taking measures,” he said.

However, Vital Stutz, who took over as president of the board at the Gemini Sammelstiftung last year, sees a structural problem with reporting and valuation.

He cited a Pensionskasse having to choose between a “solid-name equity” like Nestlé, with a dividend yield of 3.5%, or a Nestlé bond, with a 2% yield.

“From a legal point of view, the bond is to be preferred,” he said, as the debt is better placed in the case of insolvency.

Stutz explored the question of what pension funds should use as an “orientation”, as an index is “unfit” to represent the portfolio.

“The index orientation basically forces [pension funds] to stick to the benchmark because any diversion needs to be explained to the foundation’s board,” he said.
Stutz called for more individuality in asset allocation among pension funds.

Heinz Vogel, head of Central Switzerland for the consultancy BDO and board member at various pension funds, said that, “under the current circumstances, the interest and the conversion rate are too high”.

Stutz also warned the Swiss government not to increase regulation, as the system is “working fine as it is”.