SWITZERLAND - Publica, the CHF30bn (€18.5bn) pension fund for Swiss federal employees, may have trouble dealing with costs arisng from some of its members choosing early retirement, a Swiss news report has suggested.

Switzerland's Sonntagszeitung reported that by the end of the year, 2100 of the 40,000 federal employees insured by Publica will reach the age of 60 and, hence, qualify for early retirement.

If all 2100 employees chose early retirement Publica would be hit by CHF360m in costs, the paper said. Publica's on-hand reserves, however, only totalled CHF200m, it added.

EPA, the relevant government agency for Publica, confirmed the cost estimate given by the Sonntagszeitung. However, it stressed that the early retirement of 2100 Publica-insured employees was a "worst case scenario".

"Moreover, if that worst case scenario were to happen, Publica could muster the sufficient reserves to cover those costs too," a spokesman for the EPA told IPE from Berne.

In any event, the EPA said it was far more likely that 1100 employees would retire early, resulting in CHF190m in costs that Publica could easily manage.

A critical point will be the number of Publica's members who retire before reforms to the scheme take effect on January 1, 2008.

Under the reforms, approved by the Swiss parliament last December, Publica will switch to defined contribution from defined benefit. The legal retirement age for the scheme's insured will also increase to 65 from 62 currently.

Publica, a public pension fund that is one of Switzerland's biggest, was fully-funded in 2005 and finished the year with a 9.9% return.

At the end of 2005, Publica had 25.1% of assets in equities, including 16.6% in foreign shares and 8.5% in Swiss equities. Allocations to fixed income were 44%, including 38% in Swiss bonds and 6% in foreign currency paper.

Publica also had another 9.93% invested in real estate assets and near 21% in cash and money-market instruments.

The scheme is due to release its results for 2006 in May.