Swiss pension funds have recorded average investment returns last year of -11.9% in a turbulent 2022, according to consultancy PPCmetrics’ Pension Ticker.

The technical funding ratios of Swiss schemes – the ratio between assets and liabilities – lost on average around 16 percentage points over the course of the past year, and stood at 103.9% on average at the end of 2022.

The economic funding ratios of the pension funds – the ratio between assets and pension obligations valued at the current risk-free market interest rates and the vested benefits of a pension fund – fell much less sharply, by around 7.5 percentage points over the course of last year, according to PPCmetrics’ Pension Ticker.

On average, the economic funding ratios, including future benefit promises, showed only a slight decline, from slightly above to slightly below 106%, it added.

Lukas Riesen, partner at PCCmetrics, told IPE that “the negative return in 2022 was the consequence in particular of the rise in interest rates and the resulting returns on bonds, as well as the negative returns on equity markets. The expectations of returns on investments for the future have improved due to higher interest rates.”

Lukas Riesen at PPCmetrics

Lukas Riesen, PCCmetrics

He added: “From our point of view, the central point is that the higher interest rate level brings with it substantial economic relief in terms of liabilities for the Pensionskassen. For many pension funds, especially pension funds with a high share of liabilities to retirees, the actual financial situation in 2022 has not deteriorated, or has even improved.”

Among the largest schemes, the pension fund for the employees of the canton of Zurich, BVK, has returned -10% at the turn of last year with the chief executive officer describing 2022 as “a very demanding year,” according to reports.

Compenswiss, the public institution managing first pillar social security funds AHV, IV and EO, worth a total of CHF40.88bn (Є41.3bn) as of September, lost CHF4.5bn in 2022, recording a performance of close to -12%, the worst result since 2008 (-18%), the president Manuel Leuthold said in an interview with Handelszeitung newspaper.

Migros Pensionskasse, the pension fund for the Swiss retailer, reduced its losses from -6% at the end of October to -4.3% at the end of November last year, with all assets classes posting negative returns, apart from real estate.

Asga Pensionskasse returned -5.52% last year, the pension fund for the city of Zurich (PKZH) returned -10.4%, and Publica -10.98% as of the end of last September.

PPCmetrics’ Pension Ticker shows, however, that so far this year Swiss Pensionskassen have recorded average returns of 2%, with technical funding rations standing at 106% (+1.9%), economic funding ratios at 108.4% (+0.6%), and the economic funding ratios including future promises reaching 104.6% (-0.2%).

The Pension Ticker, which estimates the rate of return and the funding ratio of Swiss Pensionskassen on a daily basis, is based on data of more than 350 pension funds with total assets under management of CHF750bn, and over 3 million members.

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