Volatile markets widen Basle hole to CHF2.8bn
SWITZERLAND - The city of Basle has to earmark CHF79m more than expected from the budget for fully funding the pension fund of its employees (PKBS).
Instead of the envisaged CHF1.3bn (€820m), the canton "Basle city" has to pay CHF1.379bn.
No detailed accounts for the pension fund performance in 2007 were published yet but the city's government noted "the dampened performance of the Pensionskasse in the second half of the year" led to the increased deficit.
Basle has already saved up CHF364m for the Pensionskasse, the other CHF1bn will be paid over the next years.
The city announced its budget will be almost CHF500m in the red because of the payments for the pension fund.
Under a new law, which has come into effect at the start of this year, the funding level of the Pensionskasse had to be increased from just under 80% to 100%.
Half of the CHF2.8bn hole in the fund will be filled from the city budget, the other by increasing active members' contributions and cuting pension increases for retired staff. (See earlier IPE story: Basle's embattled pension scheme set for 2008 bailout)
Once the Pensionskasse is fully-funded it will lose the so-called "state guarantee" which so far has ensured sufficient funding from the canton's budget whenever needed.
Because of this system many Swiss public pension schemes are heavily underfunded, some by over 60%.
However, the Swiss government is set to implement new regulations which will require all public funds to get to a 100% funding level over the next 30 years. (See IPE story: Swiss public schemes told to get fully funded)
Meanwhile, the €4.8bn PKBS has announced its deputy director Ruedi Zeller will be leaving the fund in April to become the head of the public pension fund of the canton Zug.
He will be replacing retiring Othmar Müller at this €1.2bn fund.