Switzerland's new top supervisory body, OAK, has issued its first major regulatory edicts, tackling the long-debated issues of the interest paid by pension funds and funding levels at public schemes.
On the matter of lowering interest on members' assets in fully-funded pension funds, the OAK has decided against a legal decision upheld by cantonal supervisors. Under current Swiss law, underfunded pension funds have been able to suspend the interest paid on members' assets or lower them below the legal minimum rate.
But the OAK has ruled that the BVK's [a Pensionskasse for civil servants in Zürich] legal framework did not support restrictions against funded Pensionskassen managing above-mandatory contributions. It said funded schemes "in danger of becoming underfunded" or "facing negative returns" would also be able to lower the interest on contributions, so long as it guaranteed the minimum interest required in the mandatory part of the scheme. The supervisor warned that the measure should not be used lightly, and said that this lowering of interest on one part of assets must not be used to recover structurally underfunded schemes.
The OAK stressed that, from now on, the guarantees offered by public authorities on their pension funds would only expire once "sufficient buffers" had been built in the fund. To date, guarantees have been lifted when the funding level drops to 100 per cent, which has increased the number of underfunded Pensionskassen, particularly during the financial crisis.
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