Faire Vorsorge, a Swiss think tank backing liberal views on pensions, has proposed the creation of a sovereign wealth fund (SWF) holding CHF300bn (€319bn) in assets to fund the first-pillar social security fund AHV.
According to the proposal for a so-called AHV Generationen-Fonds, the SWF’s assets would be invested “forever” in international capital markets, transferring around CHF20bn per year to the AHV.
Returns on assets invested in international equity markets would contribute to shaping AHV’s finances in the future, with 20% of expenses covered over a period of 40 years.
The proposal echoes the Generational Capital equity fund in Germany, which was shelved after the collapse of the country’s traffic-light coalition government.
According to KENFO, the designated asset manager, investments would generate a net return of, on average, 3.8% per year, with assets growing to €247bn by 2036 to transfer €10bn to the first-pillar manager Deutsche Rentenversicherung to slow down the increase in contributions.
Experts at Faire Vorsorge in Switzerland figured 2.8% returns net per year on capital invested for the SWF, taking into account financing costs of 1% and 0.2% for asset management costs.
The Swiss National Bank (SNB) would provide CHF300bn foreign currency assets as a loan to kick-start the SWF, with a 1% interest, according to the plan.
The SNB held CHF724.69bn foreign currency reserves at the end of last year, according to the central bank’s figures. The SWF would start to pay back the loan in instalments of CHF30bn per year from the 31st year from its inception.
The fund would reach total reserves of CHF373.7bn in the 31st year of life, and CHF542.8bn in the 41st, according to calculations by experts.
It can have a lifespan of 40 years to pay back the loan to the SNB, according to the proposal. After 40 years, the debt-free fund would amass around CHF540bn in assets.
A ‘commitment clause’ for the fund is drafted in the unlikely event that the SNB were forced to revalue the franc, while a change of purpose of the fund would only be possible with a qualified majority of the votes (two-thirds or three-quarters majority) in Parliament, experts have said.
Faire Vorsorge’s experts have put forward the SWF model to fund the first-pillar social security fund in view of an increasing number of people retiring in the years to come, against a lower number of employees financing pensions through contributions, increasing life expectancy, and difficulties to reform the country’s pension system.
The AHV, the largest of the three social security funds managed by Compenswiss, faces a CHF383m deficit by 2030, and CHF2.70bn deficit by 2040, according to figures published by the Federal Social Insurance Office (FSIO).
The outlook takes into account the plan to finance the 13th month of pension (13. AHV-Rente) from 2026, a measure that will cost CHF4.2bn in the first year, by increasing the VAT by 0.7 percentage points.
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