SWITZERLAND - The CHF30bn (€27bn) Swiss pension fund Publica returned 1.09% over the first half of 2011 and reached a funding level of 101.9%, according to latest results.

While the fund's return is above the average reported by the asset management firm Swisscanto for a sample of Pensionskassen in its Pensionskassen-Monitor as of 30 June, Publica's funding level is well below the 2010 year-end figure of 104.9%.

In a press release, the Swiss pension fund said the results were due to lower interest rates, which led to a deterioration of the economic situation in the whole second pillar, including for Publica. 

Swisscanto had calculated an average funding level for the half-year of 102.6% (-2 percentage points) for private funds and 91% (-1.3 percentage points) for public funds.

The asset management company also said it expected the weighted average funding level of private funds to fall to 96.3% by mid-August.

This "worsening of the funding situation", with funding levels below the 2010 year-end figures, was caused by the negative currency and the market environment, Swisscanto said.

For its sample of pension funds, Swisscanto calculated a 0.1% performance for the first six months.

Meanwhile, the pension fund Aargauische Pensionskasse (APK) reported a loss of 4% at the end of August, with most of the losses having been sustained over the summer.

At the end of June, APK's performance was only slightly negative (-0.8%), but fell to -2.8% at the end of July.

APK reported that the losses were mainly linked to its equity portfolio, but that the strong Swiss franc had also contributed to the negative performance.

Given the difficult macroeconomic environment, the commission responsible for the second-pillar law, BVG, has recommended to lower the minimum rate Pensionskassen have to grant as interest for their members from the current 2% to 1.5% by 2012.

The commission noted in a press release that the majority of its members had voted in favour of such a move and that the suggestions had ranged from leaving the rate at 2% to cutting it to 1%.

The Swiss government will now decide whether or not it will follow the recommendation.

In other news, the government of the canton of Zürich has now confirmed that the public pension fund for civil servants in the canton (BVK) will be turned into an independent foundation by 2014 regardless of its funding situation at the time.

For several years, the government had muted plans to release BVK from state control but the underfunding situation had always been an obstacle.

The president of the local government, Ursula Gut-Winterberger, noted at the presentation of the government programme that a bill on the privatisation of the fund would be drafted to allow the full funding within the next seven years.

According to the government agenda, this will include a reduction of liabilities and an increase in the funding level, but no details of these plans have yet been provided.