SWITZERLAND - Aargauische Pensionskasse (APK), a CHF6bn (€3.6bn) pension fund for Swiss civil servants, has lost one of its public employer-backers to another Pensionskasse as the employer in question is unwilling to help finance its bailout.

The city of Zofingen, located in the canton of Aargau, has decided from January 1, 2008, its 249 employees will be insured by Comunitas, a CHF1.7bn Pensionskasse, instead of APK.

Zofingen's government said it would have to contribute CHF13m to the planned bailout of the scheme if it remained tied to APK.

APK faces a funding deficit equalling CHF1.5bn which partly resulted from overexposure to equities during the crash of those markets earlier this century. Relative to liabilities, APK is only 77.3% funded, one of the lowest known ratios for Swiss Pensionskassen.

APK's 200-odd public employer backers plan on bailing out the scheme from January 1, 2008 but in exchange, the scheme is to implement several reforms, including switching from defined benefit to defined contribution, raising the retirement age to 65 and requiring 40 years of contributions to the fund before receiving a maximum benefit.

Zofingen's departure from APK is not set in stone. The city's government acknowledged APK could resort to legal means to force it to remain a backer, though expressed confidence such a move would fail.

"Even if our decision would not be fully vindicated in court, there would be no additional cost," representatives of Zofingen said in a statement.

That said, the city's government is planning to leave its retirees with APK, as doing so would save it an additional CHF5.5m.

Zofingen's government said the Communitas pension plan was very much like that of APK so its employees "wholeheartedly supported the switch".

Judging by its latest figures, Comunitas is in good financial shape as the scheme returned 7.8% in 2006 - above the 6.9% average for Swiss Pensionskassen - and had a funding ratio of 112%.

As of last March 31 2007, Comunitas had 24.6% of assets in Swiss equities and 17.4% in overseas stocks, while bond allocations totalled 26.8%. Comunitas' other allocations at that time were 16.2% in real estate, 7.8% in alternatives and 7.4% in cash.

Comunitas insures almost 11,000 local government employees around Switzerland while its pensioners total 1755.

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