SWITZERLAND - The inclusion of pensioner benefits in recovery measures for underfunded pension funds was the subject of intense debate at an industry conference today.

A survey of 76 trustees, presented at the Fachmesse zweite Säule conference, showed that 60% of funds had to implement recovery measures, including contribution increases, as well as possible cuts in the pension promises or hikes in the retirement age.

Under current Swiss regulations, pension benefits in payment cannot be altered. But the survey showed that many trustees were concerned about the potential inter-generational injustice this could cause, with the issue being raised in 84% of discussions concerning recovery measures.

"Legal changes are necessary and certain parameters should be defined under which contributions by pensioners should be made possible," said Olivier Deprez, actuary and member of the Swiss commission for the review of the second pillar.

Brigitte Schmid, head of the Swiss Re Pensionskasse, said she wanted pensioner participation in recovery measures in schemes of companies that only pay the legal minimum into their pension funds, and which therefore have less leeway than more generous plans.

Deprez suggested allowing pension cuts of 1% per year over a certain period, although he admitted that this might not be appropriate for smaller funds.

"This would amount to the same as several years ago when Switzerland was still generating inflation as pensioners do not have a legal claim to indexation," he said.

According to the poll, 65% of Pensionskassen have not indexed their pension payments in the last five years. "We should stabilise the second pillar for the long-term and not just introduce short-term recovery measures," Deprez added.

However, Jürg Brechbühl, a lawyer, argued that the inclusion of pensioners in recovery measures would have a domino effect on many other regulations, such as the appointment of a pensioner representative to trustee boards, compulsory indexation and reducing the discount rate from the current 3.5-4%.

Othmar Simeon, managing director at Swisscanto, said he would like to see a complete overhaul of the system, whereby only a minimum level of pension guaranteed and the rest flexible according to the financial situation of a fund.

"A 'flexibilisation' of pensions seems a good idea but the transition phase will be difficult to manage," noted Christoph Ryter, head of Swiss pension fund association ASIP.

Union representative Rita Schiavi demanded something similar but wanted the guaranteed pension to come fully from the pay-as-you-go first pillar and the rest from the second pillar.

All participants in the discussions noted they were against creating special funds for pensioners only.