SWITZERLAND – The Swiss Federal Council has set up a working group to address pension fund deficits at railway operator SBB and public employee fund Publica.
The working party features experts and the chief executives of schemes. It is expected to produce a report with solution proposals in the summer.
The report will be examined by the Federal Council, but it is also expected to trigger “a great deal of discussions” from the public, said Rinaldo Gadola, head of the regulator for second-pillar pension funds.
Talks about the working group have intensified in the last few days, as SBB’s annual report has revealed the company‘s profits have nearly doubled to CHF42.6m in 2004, while its €8.7bn autonomous Pensionskasse has posted a loss of CHF200m, bringing its deficit to CHF2.3bn (€1.49bn).
SBB chairman Benedikt Weibel says the situation has nothing to do with market “speculation” or “management mistakes”.
But he said it stems from the fact that the state provided nothing for reserves when the pension fund became independent in 1999 - although there was enough for a 100% solvency ratio.
Emergency contributions paid by members and sponsors have been in place in since July 2003 to tackle the issue.
Employers and employees give the equivalent of 1.5% of monthly salaries as a restructuring fee, which totals CHF50m.
SBB’s coverage ratio dropped to 84.9% in 2003 and 83.4% at the end of 2004.
“Either the state pays the difference between contributions and costs, or deals with the pension plan or finances it,” Weibel said. “There is no other solution.” The SBB scheme wrote to finance minister Hans-Rudolf Merz last February seeking help.
Regulator Gadola denied Swiss media reports that the state has refused support to ailing pension funds. He pointed out that the working group and the council will decide on a solution, which will not necessarily involve the state finding the money to plug the total deficit.
A “quasi-support” deal could be struck with the state helping pay for pensions of the employees who were members of the pension funds before they become independent.