Pension funds from UBS and Credit Suisse: There will be losers in the giant merger

So will there be a complete takeover, as in the case of operational units? A CS spokesman said it was too early to make a statement. Two retirement giants would come together. CS-PK’s total assets at the end of 2022 were 17.4 billion francs. There are more than 18,000 active insured people and around 11,000 retirees. UBS-PK is even larger, with total assets of 27.8 billion francs, more than 20,000 active policyholders and around 16,000 retirees. The number of insured people is likely to decrease significantly in the future because the merged large bank will employ fewer people.

The CS/UBS pension fund will be Switzerland’s largest pension fund, with assets of 45 billion francs. This would be larger than the federal staff’s public with 110,000 insured and 39 billion in assets, or Zurich BVK with 93,000 insured and 36 billion in assets, and Migros-PK with 30 billion in assets.

Nothing decided yet

While UBS boss Sergio Ermotti (63) is accelerating the merger of the two banks, no decision has yet been reached regarding the pension funds. This is not unusual. In large acquisitions, it often takes years to sort out the final details of the future of pension funds. Unlike a business, the acquiring company cannot simply dictate the terms of the pension provision.

A company’s pension fund is organized as an independent foundation consisting of an equal number of employer and employee representatives. Pension fund expert Willi Thurnherr, of pension consultant Aon, says it is the trustees who need to think about what happens next. “Both foundation boards must approve the merger. UBS’s pension fund cannot dispose of CSs.” Foundation boards are prominently represented: the chairman of UBS-PK is Swiss magnate Sabine Keller-Busse (58). Her counterpart is the former CS risk manager and Swiss Re board member Joachim Oechslin (52).Vice president is CS Switzerland boss André Helfenstein (56).

“In the event of a merger, the ‘acquired rights’ of all insured parties must be preserved,” says Thurnherr. It should not be the case that UBS’s policyholders are better off at the expense of CS’s. “In the case of a merger, important elements such as the technical interest rate and other valuation bases or coverage ratio need to be adjusted. “No group should be favored or disadvantaged over another.”

The CS-PK website also states that “in principle, something called dilution cannot be done.” When the SBG and SBV pension funds merged in 1997, surpluses were paid separately to the relevant employees. If pension funds did this again, policyholders could expect handsome distributions, as both funds have coverage rates as high as 130 percent.

Different retirement plans

Despite a balanced balance of power, there may be losers. This has to do with benefits and retirement plans, which are different at CS and UBS. A few years ago CS-PK introduced 1e pension plans. These allow employees to decide for themselves how their retirement assets will be invested in insured salary components above 132,300 francs.

But you also carry risks. UBS-PK is unaware of any such plans. If UBS does not take over these pension plans, this could potentially mean that some insured people will suffer losses on their assets. In this case, UBS may introduce longer transition periods. Another option would be to maintain both retirement plans in parallel, which would be quite complicated in practice.

After all, a completely different variant from liquidation or merger can also be considered: CS employees who switch to UBS will receive new employment contracts from UBS. Pension assets will be transferred from CS-PK to UBS-PK. CS-PK can then exist for decades. Over time, it would become a fund aimed entirely at retirees. For UBS, this means it must step in if assets are not sufficient to cover pension obligations.

*Business journalist Beat Schmid has worked for many major media companies throughout his career. He writes about financial matters at SonntagsBlick.