SBB, the CHF16bn (€13bn) pension fund for Switzerland’s federal railways, returned 1.5% over 2015, slightly below the benchmark (1.6%) but well above the market average, at just over 0%.
The results were achieved with an allocation to equities of just under 23%, fixed income of 56% and real estate of 10%.
SBB’s funding level, however, dropped to 105.7% from 107.3% year on year.
In a statement, the scheme pointed out that, to maintain a steady funding level, it would have needed a 3% annual return, as SBB, like many other Swiss pension funds, has adjusted its technical parameters.
As of January, the rate applied to active members’ liabilities, the technischer Zins, was lowered to 2.5% from 3%, while the conversion rate was lowered to 5.22% from 5.848%.
This cut in the conversion rate was well below that proposed in the AV2020 reform package, but it is a more realistic one, according to Jürg Walter, managing director at Swiss pension fund consultancy Libera.
“A conversion rate of 6% means a too high promise of an interest rate at 3.5%,” he said.
Walter based his estimates on the new technical parameters and longevity calculations published at the end of last year by Aon Hewitt and Libera that Pensionskassen have to apply.
According to the new generation tables, the number of male pensioners, out of a sample of 10,000, to die at 80 has decreased from 541 in 2010 to 470 last year.
The longevity expectations for women are also still on the rise but less so than for men.
Walter said using generation tables rather than periodic tables allowed a “more accurate” calculation of technical parameters such as the technische Zins or the conversion rate.
He said generation tables were already taking into account a further increase in longevity in the near future, reducing the need to make frequent adjustments.
Along these lines, SBB has switched from using periodic tables to generation tables.