SWITZERLAND - The government's efforts to prevent further fraud cases in the Swiss second pillar by creating a new supervisory body will actually increase the potential for criminal activity, according to Christoph Curtius, member of the board at PKRück, a re-insurance company for Pensionskassen.

"The second pillar will never be safe from people with fraudulent intent because of the amount of money managed there," he said.

"The increased amount of powers that will be given to members of regulatory bodies and of auditing companies will make them just as vulnerable as the people carrying responsibilities within the Pensionskassen."

Parliament passed the structural reform in mid-March which will see the creation of a new supervisory body at the top level, among other reforms regarding governance.

Various market participants have criticised the reform, and the head of the project team for the structural reform at the Swiss interior ministry, Barbara Brosi, told IPE they had received 500 comments in total - with half being identical complaints based on a sample letter by "a pension provider".

The federal government will decide over the next few months which adjustments will be made to the regulations and which will remain under discussion.

Curtius criticised the fact there seemed to be a kind of general suspicion of trustees and board members at Pensionskassen, as the new top-level supervisor will also be granted the right to look into these people's personal accounts. 

"This is offering a false sense of security for the public," he added.

The board member at PKRück also argued that tighter regulations would further constrain pension fund boards' decision making.

Overall, he expects the structural reform to increase costs for Pensionskassen, leading to a drastic consolidation in the Swiss second pillar, which currently comprises almost 2,500 regulated Pensionskassen.