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Underfunded Swiss funds soldier on

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SWITZERLAND - The €5.56bn Bernische Pensionskasse (BPK) will start talks on a possible restructure early next year, while the pension funds of Swiss railway company SBB have abandoned plans to sue the federal government.

In a letter to its 30,000 members, the pension fund for the civil servants of the Swiss canton of Bern today said its cover ratio had dropped further in October and was now below the 94.1% recorded at the end of September.

Though BPK does not intend to change its investment strategy - which currently sees the fund invest 38% of its assets in equities - it will deliberate from January whether it needs to implement reforms such as raising its contribution rate and lowering the pension payments.

The fund added it is unlikely to switch from a defined benefit to a defined contribution scheme before 2012, following in the footsteps of SBB Pensionskasse which announced last month it will not push for such a restructuring before it has recovered its funding position.

SBB said yesterday it has now decided not to summon the Swiss federal government help the scheme's financial recovery, having earlier threatened legal action as officials were adamant the Swiss government should aid the fund.

In May this year, the SBB fund and its corporate sponsor asked the government for a cash injection of CHF2.45bn (€1.58bn) to help the scheme recover to a funding level of 100%, though this request was met with much criticism from political parties.

The Swiss government started negotiations in July on financial aid for the SBB Pensionskasse - which at 61% has one of the highest pensioners quota compared with the Swiss average of 21%.

The government indicated it could provide a payment of CHF662m but all solutions, ranging from no subsidy to the full support, were still open for public discussion until November 3.

The Swiss government said yesterday it will try to come to a solution with SBB and the SBB fund.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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