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Swiss mandatory funds need CHF16bn

SWITZERLAND - The number of underfunded Swiss mandatory pension funds has dropped from 97 to 67 in the course of 2006, reducing the gap in the system from CHF19bn (€11.4bn) to CHF16.7bn.

In total, 3.4% of all mandatory pension funds in Switzerland are below a 90% funding level, down from 4.8%, the federal ministry for social security BSV found in its latest review of the Pensionskassen.

The BSV argued it was mainly the positive development of the financial markets which aided the funds' recovery.

The majority of the deficit can be found in public pension funds with a so-called ‘state guarantee', whose liquidity is safeguarded by the government.

These funds account for CHF14bn of the underfunding with two unnamed "large pension funds" alone reporting a CHF2.5bn deficit.

However, even among those guaranteed funds the trend goes towards full funding with the number of plans in deficit having dropped from 46.8% to 37.3%.

The Swiss government is currently negotiating changes to the law governing Pensionskassen  which would force all public pension schemes to get fully funded over the next 30 years (see earlier IPE-article: Swiss public schemes told to get fully funded)

At the same time, the public pension arrangements are currently undergoing major changes with the largest fund in the sector the CHF33bn Publica Pensionskasse shifting from defined benefit to defined contribution scheme.

From July next year, Publica will be open for semi-governmental institutions such as certain universities, the patent office or the audit court.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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