SWITZERLAND – Swiss pension funds returned 6.3% on average last year, while public pension funds in the capital of Bern performed even better, according to Towers Watson's calculations for local pension fund association ASIP.
In a statement, ASIP said that, over the short term, pension funds' financial situation would continue to "improve slightly".
However, it also noted that, despite the "pleasant" performance of most schemes in 2012, the long-term returns of the sample of Swiss pension funds surveyed by Towers Watson was still only at 1.3% annualised over the past 12 years.
This, combined with the 0% average return for 2011, left many Swiss schemes below the legal minimum rate (BVG-Mindestzins) of 1.5% over the long term, the consultancy said.
The ASIP also pointed out that many Pensionskassen were using a "relatively high" discount rate (Technischer Zinssatz) of 3.5% to calculate their liabilities.
On the 2012 performance, Towers Watson, similar to other analysts found that equities were the chief drivers of return in the second half of the year.
In the sample surveyed by the consultancy – consisting of more than 60 Pensionskassen, with combined assets under management of CHF175bn (€145bn) – domestic equity exposure averaged at 21% as of mid-2012, while foreign equity exposure stood at 10%.
Among those Pensionskassen outperforming the average were the two public sector schemes in the Swiss capital of Bern, the CHF10bn Bernische Pensionskasse (BPK) and the CHF5.2bn Bernische Lehrerversicherungskasse (BLVK) for teachers.
Both funds returned more than 8.5% for 2012, according to preliminary calculations.
However, both funds adjusted their discount rates from January 2013, cutting them by 100 basis points to 2.5%, and 50bps to 3%, respectively.
This means liabilities increased and funding levels dropped even further to around 80% at the BPK (from 91% at year-end 2012) and 78% (from 84%) at the BLVK.
Meanwhile, the pension fund for the canton of Zurich, the BVK, posted a return of 8% for 2012, bringing the funding level up from 83.4% to 87.5%.
The fund said that, including the one-off financial aid to be paid by the canton, the scheme would reach a funding level of more than 90% for the first time in four years.
It said this would help the Pensionskasse to get a head start on its recovery schedule.