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Swiss pension fund interest rate stays 2.5%

SWITZERLAND - The Swiss parliament has decided to leave the minimum interest rate for occupational pension funds at 2.5%.

The decision was based "on the negative investment returns in the first half of 2006 which put the good 2005 results into perspective", reports the Swiss Federal Insurance Office which supported the move.

Parliament took into consideration the median yield of seven-year Swiss government bonds, which stands at around 2.7%.

Furthermore, it looked at the performance of the Pictet BVG-Index, with an equity share of 25%, which returned -1.85% in the first half of 2006. This negative development is confirmed by a Watson Wyatt performance study, which showed that pension funds returned -0.3% in that period.

Minimum rate has in the past been quite a controversial topic in Switzerland.

It was raised from a low of 2.25% to the current level two years ago after being lowered from 4% to 3.25% in January 2003.

Unions have said the low rate is a gift for the pension insurance companies.

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