A Brexit-fuelled fall in sterling that benefited UK equities helped boost pension funding levels at Swiss companies in the third quarter, according to Willis Towers Watson.

The consultancy’s quarterly pension index for Swiss occupational pension schemes showed that funding levels rose from 88.4% as at the end of the first half of the year to 90.2% as at the end of September.

Willis Towers Watson said the increase was predominately due to positive returns from equities during the third quarter, with bond yields and hence pension liabilities largely unchanged.

Adam Casey, senior consultant at Willis Towers Watson, said central banks’ low-interest-rate policies were continuing to stimulate equity markets, and that Swiss pension funds were able to benefit from this in the third quarter and get a bit of “breathing space” in the short term.

He singled out UK equities, saying these were supported by the fall in sterling after the Bank of England cut interest rates given worries about Brexit.

The Bank of England cut interest rates to 0.25% in early August, and also re-launched and expanded its quantitative easing programme to include corporate bonds.

In the UK, this was met with concern given the impact of lower Gilt yields on scheme deficits.  

Casey’s colleague, Peter Zanella, head of retirement solutions, said Swiss Pensionskassen remained under pressure, however, given the persistent low-interest-rate environment, and that they needed to assess their asset allocation and benefit structure carefully to avoid breaking under that pressure.

Asset-liability modelling is one way pension funds can test their resilience to stress situations, he added.

The consultancy’s calculations are based on the returns of Pictet’s BVG-40 pension index with a 40% equity exposure.