The Swiss pension industry has for some time resembled a slow-moving sport in which the referees keep moving the goalposts. As in most other developed countries, pension funds in Switzerland are facing solvency challenges, mainly due to low interest rates and increasing life expectancy. It is clear to most observers that painful adjustments need to be made, and these have profound implications for employees and employers. However, recognition of these facts by many pension funds has too often been slow in coming.
This creates false hopes for many pension fund members and potential pain in the future. While corporate accounting under International Accounting Standards (IAS) has for some time reflected economic reality through higher liabilities, pension funds’ local reporting – which is the basis on which trustees make benefit decisions – has been far slower to catch up. This makes the resulting adjustments all the more difficult and is threatening the solidarity that underpins the Swiss pension system. Employees’ expectations are being repeatedly disappointed as, despite recent strong asset returns, liabilities are regularly revised upwards as well.