SWITZERLAND - The Swiss Federal Railways, SBB, says it will trade off a collective pay rise for its employees against the costs for the financial reorganisation of its 11 billion-franc (7.1 billion-euro) pension fund.

In July 2003 SBB and the unions agreed that the company and employees would each contribute 1.5%, as well as the usual contributions, against the revamp of the pension fund, one of the biggest in Switzerland.

From next year employees will be relieved of the 1.5% contribution, while the extra cost for SBB would be in the region of 24 million francs, said Danni Härry, head of communications. The decision, he said, has been approved by the trade unions.

“The idea is to leave a little more money in the employees’ pockets,” Härry explained to IPE.

Individual wages, however, could be increased 1.25% due to the introduction a new collective contract (GAV), which SBB will implement in phases; January and July.

“Some may get 1.25%, some more or some no increase, it depends,” Härry said.

SBB personnel head Hannes Wittwer said it was “a very good result for our employees”.

SBB also said the arrangement would be cost-free for the pension fund, which has 58,000 members, with more than 50% of which are retired.

The pension fund has a coverage ratio is 84.9% and returned 2.42% as of September 30, compared with benchmark’s 2.60%.

The pension assets are managed by a four-strong internal team, in charge of 12 mandates, and external managers, in charge of eight.

Asset allocation at the end of September was to bonds, 57.2%, 26.7% went to equities, alternatives like hedge funds and private equities have been allocated 2.1%, real estate 3.5%, mortgages 8.1% and liquidity 2.4%.

The fund’s director, Rudolf Stampfli, declined to comment.

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