SWITZERLAND –Ascoop, the embattled CHF2.1bn (€1.4bn) pension fund for the Swiss transportation sector, has acknowledged that it will need 15 years to restore its full financial health.
“We currently face a structural deficit on the order of CHF800m. Even after this year, which was an excellent one from a return standpoint, it will take another 15 to erase that deficit,” Ascoop director Urs Niklaus told IPE from Bern.
Ascoop’s structural deficit largely stems from overexposure to equities – particularly technology ones – during their crash of 2000-2003. Coverage ratio of the fund, which insures 10,600 people in the transportation and tourism sectors, is currently 76%.
In 2003, Ascoop sued its former chief executive Jean-Claude Dueby and its president Peter Joss, alleging that the two were involved in “dubious business practices”.
Dueby has settled out of court with the scheme but legal proceedings against Joss are continuing.
As part of its rehabilitation, Ascoop has already increased member contributions to 20% from 15% of salary while cutting the pension benefit to 63% of 67% of final salary.
According to Niklaus, further measures to take effect on January 1 include a switch to defined contribution from defined benefit as well as a cut in its Rechnungszins – a figure used in calculating how to meet pension liabilities – to 3% from 4.5% now.
Niklaus also said the fund’s financial position would be helped by an excellent performance of its investments this year. Thanks to this year’s robust equity markets, Ascoop achieved a return of 7.89% in the first nine months of 2005. The fund’s annual target return, essential to its rehabilitation, is 5%.
Ascoop currently has around 15% invested in Swiss equities and another 12% in foreign ones. Other major investments are government bonds and real estate.
Despite Ascoop’s improved fortunes, Niklaus confirmed that 20 of the firms that back it would leave the scheme on January 1.
To help expedite the scheme’s recovery, the Swiss government has hinted that it might provide a bailout. However, it has made a full investigation of the fund’s persistent troubles a pre-condition of any support.
Swiss pension experts, who asked not to be named, said that as the scheme was private, it was doubtful that the government would bail it out.