Swiss scheme moves to narrow deficit
The Sfr1.09bn (€733m) public sector retirement scheme for the commune de Lausanne in Switzerland has outlined a raft of measures to tackle its pension deficit and increase its funding level to the legally-required minimum within three years.
The fund is proposing to sell off land and buildings, issue a 30-year bond to the municipal government and increase employee contributions in a bid to ensure the scheme is 60% funded by 2012, according to Mandatewire.
The commune said that the fund's 40% funding level had been worsening since the 1970s and was not purely a product of the current financial turmoil. It added that improved longevity and fewer municipal employees had impacted the scheme's solvency.
A 30-year bond paying an annual interest of 4% will be issued, amounting to yearly payments of Sfr6m to be paid back to the municipal government.
Beat Zaugg, an investment consultant at Watson Wyatt in Switzerland, said Swiss investors have generally been more conservative than many other European investors and would now look to more risky assets to improve funding positions.
Occupational pension schemes have also set their sights on better funding levels, according to Zaugg, and were investigating investment options other than the usual high levels of fixed income usually held in portfolios.
He said up to half of all occupational pension schemes were short of being fully funded. However, these schemes legally have to be 90% funded, substantially more than local government schemes.
The commune de Lausanne is the capital of the Swiss Vaud region. In 2003 it had over 125,000 permanent residents.
--write to epfeuti@efinancialnews.com
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