Assets under management of Swiss providers of second pillar 1e plans grew by 31% year-on-year to reach CHF5bn (€4.6bn) at the beginning of 2020, according to a survey conducted by PwC Switzerland.
1e schemes give employees, whose salary is a minimum of CHF126,900 a year, the option to choose among a range of investment strategies for pension contributions.
Looking ahead, providers of 1e products expect assets to grow 15% annually to CHF10.1bn in 2025, a smaller growth rate compared to the 20% that a previous PwC survey predicted, estimating assets to reach CHF12.7bn by 2024.
This shows that providers are generally less optimistic for the future, but continue to foresee a high rate of growth in terms of assets, PwC said.
The number of affiliated companies that take part in 1e pension schemes has risen by 298 this year compared to the prior year to a total of 2,229, covering 18,592 insured members.
In its report, PwC noted that the market of 1e pension providers in Switzerland remains fragmented, with the largest by asset volume covering 40% of total assets, compared to 45% the previous year. The assets cover only 18% of total members.
However, the market share of the three largest industry players is 74% for assets and 71% of total insured members covered.
Last year, 1e pension scheme providers surprisingly reduced their exposure to equities to 29.1% compared to 33.6% the year before, despite a good year for equity returns, PwC said.
Their bonds exposure fell slightly to 42.3% at the end of last year compared to 43.5% in 2018, while real estate allocations grew to 8.4% in 2019 from 4.8% the previous year. Cash and alternatives exposures stood at 13.3% and 4.1%, respectively.
The amount of contributions for 1e plans was high particularly in the form of buy-ins, which topped regular contributions.
PwC noted that 1e schemes continue to be attractive vehicles to accrue savings for retirements.
The investment strategy of providers of 1e pension products in Switzerland will likely continue to change in the coming years to include new asset classes in portfolios.
Investment strategies may steer towards ESG funds, higher share of equities, real estate and passive investments, according to PwC.
COVID-19 pandemic may also drive changes on how providers interact with customers.
According to the survey, 1e pension providers are increasingly using a digital approach, with nine out of 12 respondents allowing to access information on line, even though clients continue to demand physical meetings.
Seven out of nine providers surveyed give clients the possibility to choose their individual investment strategy via online platforms.