SWITZERLAND – The Swiss Social Ministry, the BSV, has tendered an academic research paper on long-term return expectations, which the government wants to use to set the minimum conversion rate in the second-pillar pension system.
The minimum conversion rate, or Mindestumwandlungssatz, which has been the topic of heated debate in recent years, may be up for reform.
Aiming to bring the conversion rate down to a “technically adequate level”, the Swiss government is now seeking academic advice on “realistic spreads for returns”, according to the BSV’s tender information.
The research will be used as a “sound benchmark” in the discussion on the new conversion rate, which could be lowered to 6%.
The deadline for submissions is 6 September, with the project itself starting in October and ending in July 2014.
Meanwhile, Swisscanto has published its estimates for the current funding situation at Swiss pension funds.
Based on the asset allocation as per year-end 2012 at more than 340 Pensionskassen, Swisscanto calculated an average funding level of 111.3% for private pension funds and 101.4% for those public pension funds targeting full funding.
Due to market downturns in the second quarter, the average funding level fell by 1.7 percentage points for both public and private pension funds compared with the first quarter.
Those public funds still relying on a state guarantee saw funding levels drop from 76.2% to 75.2%.
In total, only 6% of private pension funds remain underfunded, while the share was much higher among those public funds aiming for full funding – 44% remain below the 100% threshold.
Within the sample used by Swisscanto, consisting of Pensionskassen managing CHF481bn (€390bn) in total assets, the average return for the first half of 2013 was 3.2%.