SWITZERLAND - The Dutch and UK approaches to occupational pensions offer some “best practices” that could be applied to the Swiss situation, says the International Monetary Fund.
“The occupational pension pillar in Switzerland faces important challenges primarily regarding fragmented supervision and the predominance of administratively set parameters,” the fund said in a report on Switzerland.
“Recent reforms implemented in the Netherlands and the UK provide useful examples of new approaches.”
It added: “The Dutch system, and also the evolving UK approach, provide examples of alternative and more market-based systems that are designed to allow institutions manage their risks more freely, with a monitoring system developed by the supervisors with clear and objective triggers for action.”
The IMF said reforms should focus on strengthening the supervision of the second pillar and unifying the system of supervision. Current proposals in this regard were “a step in the right direction” although they did address variations in supervisory practices among the cantons.
The fund also called for the pension regulatory framework to be liberalised, saying funds are currently “constrained by regulatory imperatives that weaken the risk-management options of pension funds and may limit the long-term resiliency of pillar two.
“Consistent with cross country experience, there is an scope to remove these restrictions, both on the asset side (e.g., direct investment regulations) and on the liability side (e.g., centrally-determined guaranteed rates of return, the technical discount rate, and the conversion rate).”
And consideration should be given to reorienting the supervisory framework to a more risk-based system consistent with supervisory changes that are currently being implemented in the banking and insurance sectors under Basel II and the new Swiss Solvency Test. The new Dutch system provided an example of this approach.