The Swiss National Council, the lower house of parliament, has approved a motion that requires pension funds to disclose administrative costs, in a bid to increase transparency.
The National Council has voted in favour of an initiative by the Social Security and Health Committee (SGK-N), with 139 ‘yes’ votes and 46 ‘no’ votes.
The motion was triggered by a report published by the Federal Audit Office (SFAO), which hinted at “distorted information” regarding costs in the second pillar pension system amounting to CHF6.9bn (€7.4bn) in 2021.
The motion was put forward by the member of parliament (MP) for the Social Democratic Party (SP) and National Council member Samira Marti in March, describing the business for asset managers, banks and insurance companies as “lucrative”, with second pillar assets amounting to approximately CHF1.28trn.
The MP cited a study by consultancy c-alm, saying that administrative costs of Swiss pension funds accounted for around CHF981m, while asset management costs came to around CHF6.45bn, and cost premiums for administration costs, without including investment and asset management costs, to around CHF708m, as of 2021.
Both insurance companies and members are not fully aware today of the costs, said Marti after the decision taken by the National Council to change the rules.
The managers of pension funds hardly adopt strategies to reduce their costs, she said, adding: “Increasing cost transparency and better access to information strengthen competition.”
The decision taken by the National Council follows heated discussions that erupted after last month economist Rudolf Strahm revealed higher figures for administrative and asset management costs of Swiss pension funds.
According to Strahm, CHF8.6bn, or an average of CHF1,500 per year and per member, go to finance costs of pension funds. This is CHF1.5bn more than previously calculated by the Federal Statistical Office (FSO).
Unions doubled down, saying that the financial industry has cashed in CHF67.6bn from managing pension funds’ assets, to justify their opposition to the second pillar reform.
Union Travailsuisse published figures showing that the Pensionskasse of the city of Zurich (CHF2,925 per member), the railway scheme SBB (CHF1,377 per member), and the pension fund for the employees of the national postal service, Pensionskasse Post (CHF1,346 per member), record higher costs.
Adrian Schatzmann, chief executive officer of Asset Management Association Switzerland (AMAS), said that costs can be “easily financed” with returns.
Last year, occupational pension schemes returned CHF57bn net, against asset management costs of 0.5%, or CHF5.5bn, he added in an interview with Handelszeitung newspaper.
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