Swiss rail fund recovery go-ahead under new chief
SWITZERLAND - Markus Hübscher who will take over in November as head of the Swiss federal railway pension fund (SBB PK) will be implementing a ten-year recovery plan.
Hübscher, who previously set up and headed the Swiss branch of BGI, joined the SBB Pensionskasse on 1 September after having been elected by the board members in spring this year. He takes over from Rudolf Stampfli, the current chief.
The pension fund’s administrative board now has agreed to a recovery plan drafted by its members, which will require various measures to be taken over the next ten years.
Per year-end 2008, the PK SBB was lacking CHF3bn (€1.98bn), the fund noted in a statement issued today. The funding level was then at 79.2% down from 92.4% a year earlier.
“Based on the current strategic asset allocation, the recovery measures by the SBB and the pension fund members as well as with the expected support by the federal government it is highly likely that the fund will be back to full-funding by year-end 2019,” the SBB fund pointed out.
A spokesman for SBB told IPE that the fund had amended its tactical asset allocation as the risk budget was lower, and the fund “could not invest as aggressively as before because otherwise the risk would have been higher”.
And Stampfli confirmed: “We are regularly reviewing our investments and are making amendments when necessary.”
At end-December 2008 the fund was invested 45.5% in Swiss franc-denominated bonds (compared to a strategic asset allocation mark of 42%), 5.6% in euro-denominated bonds (5%) and 6.7% in bonds in other currencies but hedged into Swiss francs (6%). Equity investments were 6.4% in domestic markets (8%) and 12.8% globally (16%).
As the fund fell under the lower tactical margin for global equity investments of 13%, the portfolio was rebalanced in mid-January 2009, SBB PK noted.
The rest of the portfolio was made up of mortgages 6.2% (7%), indirect domestic real estate 5.1% (4%), hedged indirect global real estate 2.5% (4%), cash 4.7% (4%) and alternatives 4.5% (4%), which included commodities, hedge funds and private equity.
Last year the fund generated a -11.48% return and beat its benchmark which returned -12.75%.
As part of the recovery measures, SBB will make an additional payment of CHF938m on top of its share of the recovery package.
This package will see no interest rate granted for accrued benefits in 2009, and only a minimum interest of 2% (the current legal minimum) for the next ten years.
Furthermore, the SBB and its employees will see their contributions to the SBB PK rise by 2% between January and June next year and from then by 2.5%. The fund will also increase the retirement age from 63.5% o 65%.
Retired members will not receive pension indexationfor the whole of the recovery period.
The federal government has put out a memorandum for consultation on financial aid for the ailing SBB scheme and parliament will have to decide on it this winter.
It is expected that the government will pay a minimum of CHF1.15bn. (See earlier IPE article: Underfunded Swiss funds soldier on)