SWITZERLAND - The Swiss Federal Social Insurance Office has estimated that currently around half of all Swiss pension funds are underfunded.

A spokesman for the department said that even though there are no official figures for 2008 yet, the office expects pension funds will have significantly deteriorated since 2007.

The average cover ratio of Swiss second pillar funds at the end of 2007 was still at around 116%, but in 2008 most funds did not get the returns needed to keep a stable cover ratio.

"Pension funds need an investment return of 4% per year, just to keep their cover ratio constant," said the office in a statement, adding that it foresees underfunding for between 30% and 50% of the pension funds.

"This proportion can fall or rise quickly because of the high market volatility," it concluded.

Switzerland has a security fund, which intervenes in case of insolvency of a scheme.

According to the Swiss social security office, in a normal year the security scheme pays between CHF50m and CHF100m per, though it has no plans to raise the contribution to the fund.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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