Switzerland’s €2bn ABB Pension Fund is no slave to regulation and even claims the way it interprets pensions law in the rich Alpine state has enhanced the way the regulations have evolved there.

“The last reform of Swiss pensions law saw the introduction of a new rule, namely that members must be given a choice between different investment strategies for their savings and therefore choose the level of risk/return they prefer,” the scheme begins. “We at ABB had already successfully implemented a rudimentary version of this law some 10 years back, making us something of a pioneer in Switzerland.”
To validate its claim, ABB Pension says that this year it has undergone further change and now offers even more individuality and flexibility. “Members can now choose between four investment strategies instead of two.”

MIX AND MATCH
In essence, the strategies differ by the amount of bonds, equities or money market funds they offer. But it is not just in the number of strategies that ABB has enhanced the level of flexibility it offers. “Members can also choose a mixture of strategies for their individual portfolios and they can change their mind more often. In the past, they could alter their investment choice just once a year. Our new development allows them to modify their choices once a month now,” the Fund explains.

MONTHLY INTEREST
To help members make the right choice and optimise the maximum possible returns they can make from their individual accounts, ABB reviews investment performance regularly. This approach also helps members understand and manage the risk they take. “The rate of interest on the savings capital of the members is calculated on the basis of the actual return on investments in the four investment strategies throughout the year,” it says. “The members therefore have a much better possibility of choosing the level of risk they can tolerate for their investment to achieve their objectives,” ABB adds.

UNLOCKING CAPITAL
Conscious of the demands modern living can place on an individual’s finances, ABB takes a very flexible approach to how members can take their money. Early withdrawal is possible for a number of reasons, not just for retirement income or disability.

“Members may want to unlock the capital they have accumulated in the scheme for a variety of purposes. It could be to finance the purchase of a property. Maybe it’s because they have recently divorced and need to settle the split financially or recalculate their own position once the divorce settlement has gone through,” the scheme suggests. “Whatever the reason, the member simply has to review each of their strategies and decide which one would be best to use to withdraw the cash from. It’s that simple.”

KEEPING UP TO DATE
Since ABB’s strategy now encourages members to review and change their investment strategy on a monthly basis, it follows that a communications policy that is also based on monthly updates should complement it. Thus, ABB says members receives detailed information each month. “This includes monthly performance data about the investments and a quarterly statement outlining the value and position of their savings.”
Should a member decide to leave the company, ABB pays out the full benefit that is owed o the former employee as a termination benefit. “The rate of interest we use for this will match the interest rate for the month the member actually leaves the group,” ABB says.

SOLID FOUNDATION
Offering a dynamic and flexible choice of investment options doesn’t come easy and requires specific expertise. To ensure its strategy is successful, the ABB scheme has joined forces with its sister organisation, the ABB Asset Growth Foundation, which was originally established to provide employees with a private savings account. ABB says the company pays a 3% premium on the first CHF15,000 that members accumulate in the foundation. Members of the pension scheme can then transfer their savings in the Foundation account so they can be consolidated with their savings in the pension fund to be put to work and earn greater returns from the investment markets.

HIGHLIGHTS AND ACHIEVEMENTS
Claiming it has an influence on the law may be a bold claim, but given the fact ABB has been offering a level of investment choice that Swiss law now obliges all Swiss defined contributions pension schemes to do for the past 10 years, you can forgive ABB for being pleased with itself.

But smug in its drive to improve its services it is not and it has recently improved not only the level of choice members can make to build the best level of retirement income but also the flexibility with which they can chop and change strategy or choose to take their money.

In addition, by allowing members to pool their assets from other group savings vehicles with their scheme assets optimises the level of pension they can accumulate from the flexible and various investment strategies ABB offers.