SWITZERLAND – A new verdict on commission payments gives hope to Pensionskassen, according to the pension fund of the Swiss canton of Zürich, BVK.
Swiss courts have already ruled on commission payments to intermediaries as an incentive for introducing investors to a fund or strategy. In most cases the ruling is that these payments should be passed on to the end-client.
Under the Swiss structural reform regulations, which are currently being implemented, these commissions, or retrocession payments, must be fully published by the intermediary and contracts that include a blanket waiver on these payments by the pension fund must be rewritten.
The Swiss Federal Court has now added yet another verdict to support the view that the payments should go to the client – this time also regarding payments banks are receiving as intermediaries (so called Bestandespflegekommissionen).
The court added that these payments must be paid to the pension fund if the bank is part of the same business group as the fund provider.
However, the judge noted that it is possible for the client to waive part of the retrocession payment below a certain threshold, but said that this waiver must be clearly defined and the decision has to be based on well-documented calculations of these payments.
Banks might now have to refund payments received over the last 10 years should pension funds decide to take the matter to court, the Swiss office of KPMG wrote in a blog on the subject.
The Swiss BVK noted in a press release that the verdict "gives hope to Pensionskassen" which have hired many external managers.
The fund pointed that out it has been trying to get managers to reimburse the payments "for several years" now and that new managers have to accept the passing on of the payments.
"The verdict strengthens BVK's efforts to retroactively demand kickbacks," the BVK explained.
In other news, the Swiss government has issued an initial guideline to pension reform set out to start in 2020 based on the comprehensive report on the second pillar published earlier this year.
The government conceded that the conversion rate has to be cut but stressed that the level of benefits must stay the same.
In addition, the retirement age is to be harmonised for men and women both in the first and the second pillar at 65 including incentives to work longer.
The supervision of occupational pension providers is also to be changed to increase transparency of fees and costs.
The government guidelines do not include specific recommendations as these will have to be drawn up by the social ministry, BSV, over the first half of next year and then presented to the government and parliament in turn.
Read more about Swiss pensions in IPE's December issue.