SWITZERLAND - The BPK pension fund for civil servants in the Swiss capital of Berne is switching from a defined benefit (DB) to a defined contribution (DC) scheme. The fund has assets under management of CHF8.6bn (€5.4bn).

The regional parliament of the Canton of Berne has voted in favour of the switch for both the BPK and the CHF5bn BLVK fund for teachers in the region, in its most recent session.

"The government has been commissioned by parliament to draft a bill by the end of 2009 at the latest," a parliamentary spokesman confirmed to IPE.

So far, the government had been opposed to a change in the plans fearing resistance from the 40,000  combined scheme members as well as high costs arising from the switch.

A commission has looked into the financial situation of the two funds and recommended the change, but warned not to switch without fully-funding the BLVK first.

Currently, BPK is 104.6% funded (down from 109% at year-end 2006), but the BLVK is only 88% funded, with a CHF650m deficit.

Depending on the outcome of negotiations on the details of the switch, employee representatives might call for a referendum - the outcome of which would be binding, the spokesman noted.

Out of 26 cantons in Switzerland 17 have already introduced DC schemes for their public employees over the last years, the commission noted in its report.

The first to make the switch was the canton of Luzerne in 1990.

The only canton to explicitely vote in favour of keeping the DB model was Basle city in summer of last year despite a deficit, which has recently widened to CHF2.8bn. [see earlier IPE-article: Volatile markets widen Basle hole to CHF2.8bn)]

From July of this year also the CHF33bn fund for government employees will switch. [see earlier IPE-article:  Switzerland paves way for Publica's DC switch]

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