SWITZERLAND - Marco Netzer, head of the Swiss first pillar fund AHV/AVS, said he expects the pension fund to deliver "a very good" annual result and is preparing for major structural changes next year.

The CHF25.6bn (€17bn) fund has returned approximately 11% so far this year to the end of October, which equalled 9.3% after currency hedging.

"We are sure it will be a good year as the markets have recovered," Netzer told IPE.

Next year, however, the AHV has to prepare the creation of a separate fund to take care of invalidity benefits.

The Swiss people have agreed to a VAT hike from 7.6% to 8% between 2011 and 2017, to finance the creation of a CHF5bn invalidity fund (IV) in two years' time.

The AHV will be responsible for the management of this fund but the reporting for the IV fund will be managed separately.

The IV currently has a huge deficit and this is negatively influencing the AHV's balance sheet.

Despite the imminent improvement of the AHV's balance sheet, Netzer argued future revisions of the pension law regarding the AHV are necessary.

In a recent newspaper interview, Yves Rossier, the head of the Swiss social ministry, pointed out that without reform the AHV would be unable to pay out pensions by 2021.

"I was not surprised or shocked because these figures are known and talking about it now gives politicians time to deal with the issue," said Netzer.

"In fact, it is very positive to be starting talks now and revision of the AHV legislation have so far proven a good instrument for adapting the system."

The 11th revision of the AHV law has yet to be fully implemented as some points, such as the female retirement age, are still being discussed but a 12th revision is already being worked towards.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com