SWITZERLAND - The Swiss government kept the minimum return for second pillar pension funds at 2% for 2010.

This is the rate to which it was lowered during the financial crisis in 2008, following analysis of the average yield of Swiss government bonds as well as developments in the equity, bond and real estate markets.

The minimum pension rate had been 4% in the first years of the new system, until 2002 when the dotcom burst and forced the rate down to 2.25%. But it was consequently raised again step-by-step up to 2.75% for 2008 as the markets recovered. (See earlier IPE story: Swiss set pensions minimum rate

"The overall insufficient development of the financial markets is an argument against an increase of the current rate of 2%", the Swiss government said in a statement today.

"On the other hand, a lowering of the rate cannot be justified as there has been a recovery of the markets this year and a lower rate would be considerably below the long-term average yield of government bonds."

The long-term yield of seven-year Swiss government bonds is currently 2.3%, while the government also expects equity markets and real estate to offer positive returns.

The government commission for retirement provision had also suggested the minimum rate should be 2%, after reaching a compromise between proposals ranging from 1.5% and 2.5%.

The majority of employer and employee representatives have themselves suggested the rate should remain at 2% or at least stated they "could live with a rate at that level", noted the government.

Meanwhile, Credit Suisse has published preliminary calculations on its pensionskassen index suggesting investments gained 5.5% in the third quarter of this year.

"This is the second-best quarterly result since the index was created," argued Credit Suisse.

July delivered the strongest month of performance at just over 3%, followed by 1.3% in August and 1.18% in September.

In total, Credit Suisse calculated Swiss pension funds have returned an average of 9% on investments since the beginning of the year.

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