SWITZERLAND - The Swiss Pensionskasse for the city of Basel, PKBS, will receive another CHF795m (€544m) from the city but other public funds will be granted the right to remain underfunded.

The regional Basle parliament decided not to go along with initial demands by the CHF9.2bn PKBS for basing the funding on an extrapolated deficit as of end-2008. (See earlier IPE story: Basel fund proposes contribution hike for 19 years)

Instead, the deficit calculation data will be reset as 30 September 2009, which means the city will be paying CHF795m instead of CHF1.2bn.

It is also demanding the recovery period to be shortened to 12 years, which means that some of the recovery measures might have to be tightened.

Critics argue that yet another financial aid designed to help the fund become just about fully-funded will in fact leave the PKBS once again without sufficient buffers to cope with volatile markets.

According to regional regulations, the fund has to draw up recovery measures as soon as the funding level falls below 95%.

The Council of Nations, one of the two houses of the Swiss Parliament, has meanwhile rejected a government bill calling for the full funding of all public pension schemes. (See earlier IPE story: Swiss public schemes told to get fully funded)

The vast majority of MPs voted in favour of part-funding to 80% instead, which is a compromise reached with the cantons who argue many still have state guarantees on their payouts and therefore do not need full funding.

It was pointed out that full funding would cost CHF100bn if it includes reserves and CHF31bn without.

In order to speed up the funding process, the cantons will have to pay interest on the money they "owe" the fund with a minimum interest rate set by the government.

The interest is due should the fund fail to reach 60% funding by 2020 and 75% from 2030.

The government said it still wanted the public funds to get onto an equal footing with private funds but said it accepted the parliament's decision.

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