The Swiss Association of Pension Funds (ASIP) has made a renewed call for its government to abandon its proposed second pillar reforms by claiming that the Swiss public have a large level of trust in their pension funds and do not want the extra costs the reforms would bring.

An ASIP survey has found that 80% of 1000 people questioned said they had at least a large degree of faith in their Pensionskasse (Swiss corporate pension funds), an increase of seven percentage points since the same survey was conducted in 2009. The finding is politically significant; one of the main reasons given by the Swiss Federal Department of Home Affairs for the reforms is restoring trust in corporate pensions following a number of isolated corruption scandals in recent years.

Three-quarters of respondents said they did not want higher administration costs in return for greater regulation of pension funds, a figure which ASIP says marks an "indirect rejection of the various regulations proposed". In a statement, the group added that "ASIP demands that the occupational pensions reform should be cost neutral and the proposed reforms that were criticised in the consultation should be abandoned. As a better alternative the association demands a national declaration of commitment to the ASIP charter, which creates more security and transparency without increased administration costs."

The Swiss government's proposals for reform include creating a new national pension fund regulator and allowing auditors to perform spot checks of pension fund accounts.

ASIP argues that the full range of over 1000 pension funds in Switzerland should not be punished for some notable failings of a few (for instance the scandal-ridden Zurich civil servants' fund BVK, which experts say may need to have its deficit bailed out by local taxpayers). ASIP's president Christoph Ryter said: "If you catch a driver for breaking the speed limit, you don't go and drop the speed limit again and again, you make the driver pay a sufficient amount so that you frighten anybody who might want to imitate them."

There was intense criticism of the proposals in the discussion phase, with around 500 complaints being filed to the Department of Home Affairs, as Pension Funds Insider reported in March.

Martin Kaiser, the senior civil servant responsible for implementing the reforms, has since dismissed the concerns raised in the discussion phase by saying that most of the complaints received were copies of a template created by one pension provider that encouraged its staff to write in, while another 100 were identical to an ASIP template.

Finding common ground

The ASIP survey also indicated that the Swiss public has extensive knowledge of terms that are part of the ongoing debate about the pension industry. 43% of those surveyed claimed to understand the term 'working capital ratio' in its application to pension funds and some 28% said they understood what the pensions 'conversion rate' means in Switzerland (a rate which determines how an annuity is calculated from a particular pension pot).

Didier Burkhalter, the Swiss interior minister whose portfolio covers the reforms, appeared to claim credit for the government in restoring public trust in pension funds at ASIP's general meeting. He told delegates at the meeting in Freiburg that "the ASIP survey actually shows we're on the right path. Unfortunately occupational pensions, and the financial industry on the whole, have not just been creating good headlines. Some problems have created disappointment and resentment amongst large sections of the population and trust in general, not just with the second pillar, has suffered as a consequence. That's a fact."

Burkhalter then explained that support for the reforms had already been fully established in his view: "Discussions about the reform of occupational pensions have lasted a decade. The central elements of the reform, transparency, governance, independence and reform of the regulatory system with a new independent chief national regulator have been discussed at length. The parliament in the end decided that the reform should be implemented without delay."

On the somewhat acrimonious tone of the debate, Burkhalter told pension funds that "We are jointly building the future of occupational pensions for the good of savers – and therefore for the good of everyone. We are strengthening trust in the second pillar and for that we need everyone involved to conduct discussions in an atmosphere of mutual respect."

Hanspeter Konrad, ASIP director, told Pension Funds Insider that in Switzerland "occupational pension provision already forms a functional system despite all criticism. The high value of assets that retirement funds manage, in socially agreed and responsible ways, requires efficient management structures, transparency, communication with bodies representing savers and effective control. The trustee board composed of employee and employer representatives ultimately has the overall responsibility for a pension fund."

He then criticised the need for full legislative reform, by saying: "The government should take its lead from these considerations and concentrate on the creation of cost-effective general frameworks and minimum standards. All involved in occupational pensions are required to find constructive solutions for the future of pension provision, and these solutions have to meet the common aims of security, trust, efficiency, (and) transparent solutions."

"We are therefore confident that due to our countless continued interventions a few points of the regulations will still be changed", said Konrad.

Should no modifications be made, the reform will be fully implemented by the start of 2012 and pension funds will then need to wait and see if the substantial cost increases that they are warning of will actually happen. Industry estimates suggest the annual cost for Swiss pension funds of meeting the changes will be as much as 500 million Swiss Francs (£350m).

First published: 18.05.2011

dbillingham@wilmington.co.uk