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Charles Pictet critical of pensions accounting

SWITZERLAND - Charles Pictet, senior partner at Pictet et Cie, has said the implementation of the IAS19 reporting standards for pensions in Switzerland goes against the principles of the second pillar.

Pictet made the comment in his keynote address at a conference organised by Pictet Asset Management – speaking as a trustee of the company’s pension fund.

He spoke of IAS19 as he was outlining the progress of the Swiss second pillar since its inception 19 years ago.

He said the first 15 years had gone smoothly, but "unfortunately for us some dark clouds gathered in the last years". Demographic change and the 'forced introduction´ of IAS19 were cited as problems.

The new standards have created a “link” between the pension fund and the sponsor, he added.

“This practice is totally contrary to our_system,” he observed - saying the independence of the company itself and the pension fund had been at “at the heart” of the creation of the second pillar.

“These accounting standards, compulsory for companies listed at the stock exchange, have brought problems for which there is no solution yet,” he observed.

“Who decides whether to raise the fluctuating reserves of the pension funds or put the surplus onto the balance sheet of the company?” he asked.

He also said there would be potential conflicts of interest, especially for Swiss subsidiaries of multinational companies.

“Surplus and deficit will play a role more and more important in the decision making on acquisition or sale of companies,” he said.

“On the economic point of view these procedures will have as consequence an increased volatility of results for companies in trouble.”

He told IPE he was “totally against" this. He said he could see the advantage of the idea though: "These standards are good for analysts - but I have doubts."

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