Four out of ten Swiss pension funds have never debated the possibility of introducing variable pension payouts, according to a survey by the Zurich-based asset manager Swisscanto.

Faced with low returns from capital markets, demographic challenges and high discount and conversion rates, Swiss funds may in future have to cross-finance pension payouts from active members’ assets.

A solution to the problem is to adjust the technical parameters, as many are currently doing, or to introduce a bonus element to a guaranteed minimum pension for future pensioners – a measure which was introduced by the Pensionskasse of PwC in Switzerland in 2005 and by the energy Pensionskasse PKE only at the beginning of this year.

As in the Netherlands, which has seen widespread pension benefit cuts in recent years, such measures could be highly unpopular.

According to the survey 2% of the funds are already using some form of flexible pension pay-out.

Another 23% did not comment on the subject but a quarter said the topic had come up in discussions, and larger funds are more likely to have debated the matter; 8% said they had discussed the issue and decided against the introduction of a flexible pension element, while another 2% said they had decided in favour.

But Swisscanto beleives that many Pensionskassen will wait until the pension fund of the Swiss federal rail operator, SBB, makes its decision and will then check the reaction of the media and the public.

In the survey among Pensionskassen jointly managing CHF506bn (€413bn), Swisscanto also found that the average conversion rate used to calculate pension payouts from accrued assets has declined further.

The average conversion rate is now 6.34% compared to 6.7% in 2011, with 43% of all Pensionskassen having decided on further cuts down to a target level of 5.99% in coming years.

This is below the 6% threshold envisaged by the government in its ’Altersvorsorge 2020’ reform package.

Additionally, for the first time, the average discount rate applied by surveyed Pensionskassen has fallen below 3% to 2.89%.

Swisscanto calculated that the adjustment of the conversion rate over the last 10 years has decreased pension payout levels by 9.4%.