Retirement assets carry less interest

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The crisis year 2022 with the war in Ukraine, high inflation and the uncertain economic situation has left its mark on pension funds. The average funding ratio of the pension funds fell from a record 118.5 to 107 percent.

“It seems as if we can no longer get out of crisis mode,” said Vera Kupper Staub, chairman of the Supervisory Committee for Occupational Pensions (OAK BV), to the media in Bern on Tuesday. This is also a challenge for the pension funds.

Every sixth till has a deficit

“All in all, the overall risk of the pension funds has increased significantly,” said Catherine Pietrini, Vice President of OAK BV. According to the regulator’s latest board report, 16.1 percent of pension funds were underfunded at the end of 2022. Last year it was still 0.1 percent.

The reason for the development was mainly the strong negative performance in the main asset classes equities and bonds, but also in almost all other asset classes. The average intrinsic performance of the pension funds without a state guarantee and without a full insurance solution was minus 9.2 percent in 2022 – against plus 8 percent in the previous year. The situation was similar for pension funds with a state guarantee.

At the end of 2022, 84 percent of pension funds without a state guarantee and without a full insurance solution still had a funding ratio of at least 100 percent – compared to more than 99 percent in the previous year.

Lower interest on pension assets

As a result, the average interest on the pension savings of the active insured fell within a year from 3.69 percent to 1.90 percent. Because of the annual inflation rate of 2.8 percent, so many active policyholders received negative real interest on company pension assets.

“The great uncertainty forced the pension funds to deal even more intensively with their financial management,” says Pietrini. This is especially true for underfunded pension plans, but not only.

A deficit means nothing for current pensions. You are insured in the second pillar. A shortage does not automatically lead to remedial measures. “At the moment it can be assumed that restructuring contributions will only be necessary in a few cases,” says Pietrini.

BVG reform is not enough

According to Kupper Staub, the interest rate rise also has a good side: it would make it possible to finance interest rate promises in the future with less risk. In addition, the reduction of the conversion rate from 6.8 to 6 percent, which the parliament has decided, strengthens the financial stability of the system. The electorate will likely decide on the reform, as the left and the unions have called the referendum.

However, the BVG reform is not enough, as Manfred Hüsler, director of the OAK BV secretariat, states: It is now important to quickly tackle the well-known construction sites of the BVG supervision. Against the background of the unbridled development towards ever larger and more complex collective and social institutions, there is an urgent need to adjust the supervisory instruments.

Again the eleventh report

Today, the law gives OAK BV the instrument of instruction. In concrete terms, the Supervisory Committee can issue instructions for the activities of occupational pension experts, company auditors and supervisors. “But we cannot enforce this,” Hüsler said. Competencies are required, as known from other supervisors.

At the end of 2022, OAK BV conducted the survey into the financial situation of pension funds for the eleventh time. The Commission measures the financial situation of pension funds on the basis of four risk dimensions: funding ratio, interest rate promise, restructuring capacity and investment strategy. (SDA)

Source:Blick