Plummeting discount rates for liabilities caused the pension balance sheets of Swiss companies to weaken in the third quarter of this year to the point where the schemes were collectively in deficit, according to Willis Towers Watson’s latest pension index for the sector.

Overall, the coverage ratio — the ratio of pension assets to liabilities — fell by around four percentage points between July and September, declining to 99.6% by the end of September from 103.5% at the close of June, the consultancy reported.

Willis Towers Watson said this was the first time since the second quarter of 2017 that its pension index for Switzerland was in deficit.

Swiss company pension funds achieved a return on capital in the third quarter which largely matched the previous quarter’s return, the firm said, adding that this could not offset the significant decline in discount rates.

Discount rates in Switzerland for the purposes of international accounting standard IAS 19 were negative for the first time in the third quarter of this year, the consultancy said. Though they rose again slightly in September, the firm said discount rates are still negative for shorter durations and only slightly positive for longer durations.

Adam Casey, head of corporate retirement consulting at Willis Towers Watson in Zurich, said: “It is impossible to foresee the development of discount rates in the fourth quarter. However, we are preparing companies for the unusual but real possibility of negative discount rates for the 2019 valuations under IAS 19.”

Willis Towers Watson said it was now the right time to ensure assumptions used for accounting purposes corresponded to the current best estimate of the development of the pension plan.

“Adjustments to certain assumptions that have not been reviewed in recent years could lead to a much-needed reduction in pension fund obligations,” it said.

The consultancy also suggested companies might also set out to optimise their risks by reviewing the structure of their pension plans.

The pension fund index is published quarterly by Willis Towers Watson and is based on International Accounting Standard 19 (IAS 19).

At the beginning of September the consultancy warned long-term pension liabilities for company pension funds in Switzerland could rise 15% as a result of the county’s discount rate turning negative.