As many as 500 responses have been sent to the Swiss government's consultation on controversial second pillar reform so far (as of 7 March 2011), Pension Funds Insider can reveal

Certain sections of the reform have sparked sustained and fierce criticism from the industry since they were proposed by Parliament in March 2010, with major concerns being that new regulation will affect performance through added cost and bureaucracy.

Herbert Brändli, President of the Board at the €1.4 billion Profond multi-employer pension fund, told Swiss newspaper Sonntagszeitungthat from his viewpoint "employees are being dispossessed by the state. The occupational pension reforms will raise savers' contributions at the same time as reducing returns."

The Association of Swiss Pension Funds (ASIP) has been campaigning vociferously against part of the proposed reforms, and their Director Hanspeter Konrad accused the government of running the risk of missing its objectives.

"It will be employers and employees who bear the extra costs and even greater complexity. Whether that is the right way to build trust is doubtable," said Konrad.

The reform was proposed with the intention of boosting transparency and preventing abuse of the system in the wake of a major corruption scandal at the Zurich civil servants' pension fund BVK. Headline features include spot checks by auditors on pension fund accounts and a proposed national pension regulator that would compliment existing cantonal regulatory bodies, complete with a 'Mr. Pensionskasse' tsar. These will be unnecessary and expensive, say the funds, whilst the legislation could severely restrict trustee's room for manoeuvre.

Herbert Brändli told Pension Funds Insider that the plans "mark a temporary completion of the irrepressible wrath of legislation unleashed back in 1985" that proscribed minimum returns and set detailed conditions on structure, asset allocation, risk and financing. The number of retirement funds in Switzerland has dwindled from 17,900 to 2,300 in the 25 years to 2010 under a sustained wave of consolidation, making pension funds twitchy at the prospect of another major reform.

Brändli added: "Experts estimate the new laws will lead to increased annual costs of 100 to 200 Swiss Francs (£63 to £130) per member. That will hit small and medium enterprises with small pension funds especially hard."

"The proposed law covers important and acceptable measures to build trust," continued Brändli.

"Additional edicts that are being discussed are, however, way off-target, over-the-top and even contradict the government's purpose. Adding more regulation to both an ineffectively overregulated regime and bodies that have not been able to prevent the odd scandal in the past will add to complexity in the system and reduce trust as a result."

One of the 500 responses was sent by the €11 billion fund of giant supermarket chain Migros, whose President Jörg Zulauf and Chief Executive Christoph Ryter stated: "We would like to put on record that in a liberal society, new, carelessly considered regulations should be avoided. The edicts on the whole represent a false signal in their current form and we request that the edicts are rigorously revised."

The head of Schindler Pensionskasse Mario Passerini asked in a response for the whole of the proposed legislation to be delayed for a year in order to rework the controversial elements of the reform. Passerini echoed the common complaint of the proposals "seriously reducing the decision-making capacity of trustee boards" and worried that "the only people to profit would be those controlling the new regulations and the heavily overpaid workers at the new supervisory authority".

Independent advisory firm allvisa on the other hand sent in a response that zoomed in on concerns that one-size fits all regulation would severely limit trustees room for manoeuvre, writing: "The autonomy and individual responsibility of pension funds is being further threatened with a gulf between the capacity and responsibility of their leadership being widened. Pension funds are to be issued a corset that will constrict them fatally and fail to accommodate for the differing requirements of funds."

The mammoth €22 billion Publica Pensionskasse, one of the top 100 global funds, picked up on the theme of averting further corruption scandals in its response, with President Hanspeter Lienhert writing: "Without doubt it is a valid objective to avoid abuses in the second pillar. Even more detailed (over)regulation will not be able to prevent all abuses though, as not all cases can be foreseen and therefore prevented. Instead of issuing countless guidelines the generally valid and more important codes of conduct can be clarified, for instance with reference to the ASIP charta and recommended practice, or by making them universally binding."

The Federal Social Insurance Office, the state body that developed the proposed reform out of its interest to represent savers, defended its work in an interview that Director of Retirement Provision Martin Kaiser gave to Schweizer Pensions- & Investmentnachrichten. The top civil servant said: "The structural reforms will improve transparency and bring about a cultural change. Pension funds that work well have nothing to worry about."

Kaiser added: "Good governance should not always bring cost as it helps to lower costs in the medium to long term. A few reactions have erred from the facts and forget that most of the criticised points have been decided by the legislator long ago." He compared the new auditing rules to laissez-faire Swiss ticket inspectors who keep travellers on their toes by paying infrequent but notoriously strict visits to buses and trams, and said that costs for the new regulator would be no more than what funds currently pay in their ASIP association duty.

Kaiser also implied that pension funds' determined opposition might be neglecting the interests of their members by stating: "When working on the second pillar you have to make a clear choice between mine and yours. It is legitimate when legislators strengthen the appropriate laws as the most important asset of all is the trust of savers."

The Federal Department of Home Affairs in Bern will have plenty of reading in the weeks ahead as they sift through the 500 responses. Spokesperson Barbara Brosi told Pension Funds Insider that around half of the 500 submissions are identical copies of one pension fund's 'print and send' complaint, while another 100 exactly followed the scheme of a response that ASIP urged its members to post to the department.

"It can be stressed that the necessity and the stated goals of the reform are not being contested in the consultation. On points of implementation on the other hand, opinions differ, which is hardly surprising due to the high complexity of the matter and range of interests in the pension market," said Brosi.

He added that a report analysing the responses is due to be put for discussion before the Swiss Federal Council in the summer and a decision will then be made on whether to reflect the concerns of pension funds in the final version of the legislation.

That may not quieten Swiss pension politics for too long, however, with future changes to the system seen by many as an inevitable consequence of a rejection of plans to cut conversion rates for retirees in a March 2010 referendum. The shape this future may take is currently, and will continue to be, a source of lively debate.

dbillingham@wilmington.co.uk