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Switzerland merges pension expert committees

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SWITZERLAND - The Bundesrat, the Swiss executive arm, has decided to merge two expert committees working on pension-related issues into one commission.

The commissions have been working on the optimisation of vigilance and the legal framework of pensions institutions. The two committees are expected to come up with three projects by 2007: “vigilance” to be completed by 2005, “re-structure of the public funds, by the end of 2006 and the legal framework of pension institutions by the end of
2007.

The move comes as consulting firm Watson Wyatt has said that Swiss pension funds are facing increased transparency of their investment operations, due to legal changes.

The firm called the revision to the BVG, the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans an “exercise in three acts”.

It said that planned changes to the Swiss occupational retirement system would have wide-ranging impact. “The new measures will affect pension funds, their members and sponsoring employers to varying degrees, depending on the specific circumstances.”

The first package - enacted on April 1 – brings in new transparency rules, to be brought in over a transition period to January 1 2005. Under the plans, pension funds will have to disclose their costs in more detail and implement new accounting rules.

And fund will now be required to offer or procure trustee-training courses. Watson said: “The more competent trustees are, the more inclined they will be to exercise better diligence and prudence and to communicate their decisions.”

The firm added that the new standards specify the way assets and liabilities should be presented. “Assets are to reflect actual values, i.e. market values for securities and capitalizing net income for real estate assets.”

And insurers offering pension schemes through collective foundations would need to maintain separate accounts from other insurance business.

Also included in the new regulations is a five percent curb on investments in the plan sponsor.

The second phase of the reform – to BVG benefits - will take effect on January 1 2005. This includes a rise in the retirement age for women to 64 from the current 62. The third phase, which includes tax issues and whose first draft will probably be discussed in November this year, will be enacted on January 1 2006.

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