SWITZERLAND - The planned structural reform of the Swiss mandatory second pillar is unnecessarily increasing costs for pension funds, limiting board powers and partly unlawful, the Migros Pensionskasse (MPK) has warned.

With one week to go until the end of the deadline for comments on the Swiss government's reform plans, the CHF11bn (€8.5bn) Pensionskasse of the retail group Migros, the sixth largest pension fund in Switzerland according to IPE's Top 1000, has now joined the ranks of critics including the pension fund assocoation ASIP.

In an open letter to Swiss interior minister Didier Burkhalter, the MPK management stressed that, in principle, it supported the direction the reform was heading in.

However, it criticised that the pending "over-administration" of the second pillar will make it more difficult to ensure the smooth running of the management system with representatives of employees and employers on a pension fund board.

According to Migros the system had so far worked well and had helped pension funds "adjust to new needs in time".
Among the main demands for amendments both Jörg Zulauf, head of finances at the MPK, and Christoph Ryter, managing director of the fund, named the reduction of costs.

The fees under the new supervisory structure would lead to a 20-fold increase of costs for the Migros Pensionskasse, the fund calculated.

According to Ryter and Zulauf, the new top supervisory authority was envisaged too large with almost 30 employees, while delegating some of the remits currently held by the social ministry to regional supervisors.

MPK's management also criticised as "unlawful" the suggestion that fund auditors would be allowed to look into the financial affairs of individual board members - instead saying that such a step should only be athorised by the scheme itself if suspicion arose.

Other points of criticism include the use of a fixed interest rate for all funds regardless of their financial situation, as well as the regulation for so-called Anlagestiftungen, foundations which manage money for some pension funds, to only use Swiss custodians.

Further, Zulauf and Ryter are calling on the government to lengthen the implementation phase as many points of the reform bill can not be put in place by the summer and should only be applicable to the 2012 annual reports.

In addition, they are demanding a transition phase for long-term contracts running into the new regulatory era.