Die Zeitschrift IPE bringt in ihrer Dezember-Ausgabe eine Reihe von Beiträgen über die Schweizer Pensionskassen und die aktuellen Probleme unserer beruflichen Vorsorge.
Life in a save haven
When the CHF hit record heights and the EUR/CHF exchange rate an all-time low of 1.03 in August, the Swiss National Bank (SNB) stepped in by introducing a floor for the EUR/CHF exchange rate of 1.20 in September. According to market participants, the action taken by the SNB has not had a direct influence on the asset allocation of Swiss pension funds. However, as a result of the SNB’s intervention many pension funds decided to stop actively hedging their euro investments in the belief the bank had done the hedging for them.
“From a Swiss pension fund perspective, the intervention by the SNB was welcome because it stopped the fall in value of foreign assets at least in the euro-zone area,” says Christoph Ryter, president of the Swiss Pension Fund Association ASIP. At the very least the intervention led to a debate about currency hedging. The other issue is how long the SNB will maintain this policy.
“The question is whether hedging still pays off as long as the exchange rate remains around the 1.20 mark,” says Ryter. “This is not easy to answer because if the exchange rate experiences volatility, investors still risk a loss up to 1.20. There is also a tiny risk that this level will not be kept by the SNB.”
Efficent Stability
But the sovereign debt crisis certainly led to higher scrutiny of Swiss fixed income portfolios and changes are under way. “Some smaller pension funds have abandoned foreign bonds altogether and only invest in Swiss government and corporate bonds and Pfandbriefe,” says Stephanie Spozio, senior consultant at Ecofin Investment Consulting. “Larger pension funds that previously had a market capitalisation strategy have started a country picking approach, away from the traditional benchmarks, which allows them to exclude countries such as Italy, Spain or Greece and reduce the weighting of other industrialised countries with a high debt burden. And while previously, foreign corporate bonds were part of a satellite portfolio, today they are often included in the core.”
“However, the new bond world they are investing in now is not too different from what they did before,” says Kottmann. “Investors and consultants want to avoid difficult countries but do not know how because of open benchmark issues.”
No Magic Formula
“1.5% (for the minimum interest rate) seems very little, but given the market returns it is still too high,” says Othmar Simeon, managing director at Swisscanto. Rätzer expects the rate to fall to 1% in the near future. But that is almost the bottom for the Mindestzins, as the legal framework includes guarantees on contributions and pensions after inflation. “The minimum rate and also the conversion rate are like a corset that is tied around the second pillar and which is not adapting to the markets,” notes Simeon.
“For ASIP president Christoph Ryter “1.5% is a step in the right direction and we can live with that.” Currently, the BVG-commission and the government are basing their decision on average returns of seven-year Swiss government bonds, mean returns from various asset classes, as well as political calculations. “We have always pledged for a formula on which the politicians will have to agree and which would then be applied for several years in a row,” says Ryter.
But Ryter confesses that even within ASIP this is a difficult topic as various approaches are being discussed each year – “but rarely ever the same approaches for two years in a row”. Ernst Rätzer (Aon Hewitt) is also sceptical about finding a philosopher’s stone for the Swiss second pillar: “In a federal commission on the BVG ten years ago, we searched for a formula for two years but it does not exist as you have to take every class and their expected returns into consideration.”
The “quest” was repeated in 2005 but also failed after which the government issued a statement noting that neither the BVG-commission nor the expert could reach an agreement necessary to ensure stability in the system. It added that the current system has “quite proven itself” despite criticism. Rätzer would rather have the rate set annually, if it has to be set at all, “but it has to be done with the notion that this is a minimum interest rate which should be kept as low as possible”. Chuard sees a problem in the rate being set in advance, which has then to be applied by Pensionskassen in their annual statements. Further, he sees a discrepancy between pensions being a long-term affair and annually set parameters like the minimum interest or full-funding based on “arbitrarily chosen dates” such as 31 December.
The Problem of Converting Minds
Legally, Swiss Pensionskassen have to apply a 6.9% conversion rate but the actual rate used is much lower. Barbara Ottawa asks why politics are not adjusting to reality
The Super Regulator
Pierre Triponez, president of new Swiss federal pensions supervisory body – the Oberaufsichtskommission (OAK) – discusses his role and remit with Cécile Sourbes. The federal pensions supervisory body, which will start its operation in January 2012, will comprise a board of seven members, ranging from former pension funds’ employees to academics and trade union representatives.
The appointment of the board clearly faced criticism, with the insurers’ association SVV pointing out that the initiative of selecting independent specialists working part-time for the new higher supervisor would go to the wall as “this would practically exclude all experts working in the field”. But even though the members have now been named, Triponez refuses to comment on the future projects the commission will implement, arguing that the OAK is still in its infancy.
“Again, the only comment I could make would be that Swiss pension schemes are facing huge challenges at the moment and the OAK will do its best to help them, whilst making sure all the rules are rigorously respected”, he stresses. “Like elsewhere in Europe, longevity is posing a serious threat to pension funds, which also need to ensure that all the investments made over the long-term will match contributors’ needs when they will reach their statutory retirement age.”
More Fairness needed
Pension funds are feeling the pinch in the sovereign debt crisis, writes Gérard Fischer, CEO of Swisscanto. In the long term, they can only deliver their promised benefits through a better distribution of ass
ets, income and recapitalisation contributions between generations.