SWITZERLAND - Siemens' Swiss pension fund, which has CHF3.7bn (€2bn) in assets, has reported a return almost equal to the industry average and a slightly-improved funding ratio for 2006.

In its latest business report, the scheme said its return on assets last year was 6.7% - just under the 6.9% average for Swiss schemes, known as Pensionskassen. Siemens Pensionskasse also said it was fully-funded at the end of 2006, with its coverage ratio equal to 104% of liabilities compared with 102.3% a year earlier.

But Franz Haudenschild, managing director of the scheme, said the scheme's coverage ratio was still "insufficient" to deal with future risks such as sudden market fluctuations and increased liabilities stemming from ageing pensioners.

"As a result, future earnings will chiefly be used to build reserves," Haudenschild said in a letter to the scheme's members. Even so, Siemens Pensionskasse is obliged by Swiss law to credit the pension savings of its members with 2.5% in interest.

Haudenschild also said following the scandal surrounding Roland Rümmeli, the scheme's former investment chief, "our supervisory board has decided to review our internal controls and fill any gaps that may exist".

Rümmeli was fired by Siemens Pensionskasse last October after it emerged he had received CHF500,000 in kickbacks from a hedge fund called Auriga.

A subsequent external review of the scheme's internal controls found Rümmeli was able to hide his corruption because of the huge number of external managers the fund worked with.

As a result, the scheme's supervisory board last month unveiled a new mandate structure that cuts the number of external managers. Siemens has also filed criminal charges against Rümmeli and several undisclosed external managers involved with him.

In the business report, Siemens Pensionskasse also gave a rough breakdown of its asset allocation. The scheme invests almost 30% of assets in equities and 47.6% in fixed income. Another 20.6% is allocated to real estate, while alternatives account for 1.7%.

Siemens Pensionskasse insures 7825 employees and pays out benefits to 5852 pensioners.

Separately, Publica, a defined benefit scheme for 40,000 federal employees, said its switch to defined contribution would likely take place in the second half of 2008.

The switch to DC, along with an increase in the retirement age from 62 currently to 65, are reforms designed to bolster the financial health of Publica, which has CHF30bn in assets.

They were first drawn up by the government in September 2005 and finally passed the Swiss parliament last December.