The Swiss National Bank (SNB) has ruled that Publica, the country’s largest Pensionskasse, as well as its own pension fund, must now pay for accounts they have with the central bank. 

Commenting on the decision, Publica said it was “disappointed” but added that the change was “understandable given the Swiss debate”.

It also said the decision’s effect on the Pensionskasse should “not be overstated”, as it only affected its liquidity account, and the fund did “not need much liquidity to operate”.

In February, a negative rate of 0.75% was introduced on the deposit account balances Swiss banks hold with the SNB.

However, a few exceptions were made to that rule, including federal deposits, an account by the first-pillar fund AHV, the liquidity account of Publica and that of the SNB’s own pension fund, as well as two cantonal accounts.

Yesterday, the SNB decided that only the federal deposits, as well as the AHV account, would continue to be run on 0% interest, while all others will have to pay the negative interest.

Dieter Stohler, chief executive at Publica, told IPE the SNB’s decision “does not change Publica’s situation significantly”, as the scheme’s CHF38bn (€46.4bn) in assets “are still broadly diversified”.

He added that no decisions had yet been made on any potential portfolio changes in light of falling interest rates, although he said the fund was continually assessing its asset allocation.

At the moment in Switzerland, many banks have yet to pass on the fees they pay on their deposits with the SNB, partly as a means of attracting new clients. 

But Philippe Lüthy, head of investment consulting at Mercer Switzerland, expects this to change, by this autumn at the latest, as “banks cannot continue to pay these fees without passing them on”.

At that point, the investors will have to decide “whether it hurts more to pay a certain amount in fees for a cash deposit or in management fees for an investment fund in another asset category”, Lüthy said.

In any case, “most Pensionskassen are trying to hold as little cash as possible”, he added.  

Read here how pension funds reacted to the first issuing of 10-year Swiss government bonds with a negative interest rate