Swiss pension coverage ratio improves thanks to equity rally

The 11.6% rise in global stock markets this year to the end of March have helped Swiss pension funds achieve an average, enviable 98.8% asset-weighted coverage.

This makes them one of the few industries in Switzerland involved with finance not to be in turmoil, as Swiss banks face surrendering unpaid tax to foreign governments, and asset managers face far tighter mandatory home-country regulation.

The coverage rate of pensions, up from 97% at the start of 2012, was revealed by the Swisscanto Pension Funds Monitor.

The rise has brought the coverage back towards levels witnessed at the beginning of 2011, before the height of the European sovereign debt crisis.

For Swiss private-law pension funds, the estimated asset-weighted cover ratio increased by 1.9 percentage points, quarter on quarter, to 105.0%. For public-law pension funds the cover ratio increased by 1.8 percentage points to 89.9%.

This is comfortably above the 80%, partial capitalisation level that public-law funds with their state guarantee are allowed to have.

Private-law funds are required to have a ‘fluctuation reserve’ so are therefore bound to strive for a cover ratio exceeding 100%.
The estimated proportion of private-law funds showing coverage shortfalls has fallen from 26% at the end of 2011 to 17% last quarter.

Swisscanto surveyed 365 pension institutions with total assets of CHF 431bn for its study.

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