ipeTechnical assumptions in Switzerland’s second-pillar pension system are blurring the funding picture, but more "honesty" in its calculation could shrink the number of pension funds even further, Towers Watson Switzerland has warned.

The so-called ‹technische Referenzzinssatz›, a guideline for Pensionskassen on the discount rate to be used to calculate liabilities, is currently set at 3.5%. In the meantime, the return on Swiss government bonds has dropped to 0.5%.

Peter Zanella, managing director at Towers Watson Switzerland, told IPE the spread was currently too wide. He added that liabilities were being "miscalculated", as "we already know that the bond yields will stay low until 2015", and that a lower discount rate would "show a more realistic picture of the liabilities".

Zanella suggested linking the discount rate to the risk-free rate without simply using the latter as the discount rate. "The IAS19 discount rate is not such a bad benchmark, currently at 1.4-1.9%," he said.