SWITZERLAND - A Swiss municipality has expressed its support for BVK, the pension fund for the canton of Zurich, pledging "solidarity" with the scheme and hoping to convince others to do the same.

The CHF21bn (€17.5bn) pension fund is not only dealing with an alleged corruption trial against its former head of asset management, starting in July but also with significant underfunding ahead of its re-formation as an independent foundation in 2014.

In the past few years, several municipalities using BVK have publicly considered leaving because of the funding level, which stood at 83.4% at the end of last year.

Now, however, the town of Illnau-Effretikon has gone public with its support for the cantonal pension fund, which it joined in 1984.

In a statement, the town noted that the recovery efforts made by the BVK, the cantonal government and the regional parliament were "a positive sign pointing in the right direction showing that the recovery of the BVK is possible".

"The success will, among other things, depend on the institutions and municipalities in the BVK going along and showing solidarity," the town of Illnau-Effretikon noted.

Its decision to stay with the BVK has yet to be confirmed by the public employees, due to vote on the move in June.

Meanwhile, the think tank Avenir Suisse has criticised union proposals on widening the scope of the first pillar fund AHV.

The Swiss union association SGB wants higher pensions for lower earners and no cuts in pensions for anyone in the Swiss first pillar in a proposal entitled "AHVplus".

According to Avenir Suisse this "blanks out the financial difficulties of the AHV", which the fund is mainly facing because of demographic challenges.

In the most recent official statistics on the AHV, the government noted that the old-age dependency ratio within the fund would grow to 50% by 2050 - meaning that in 40 years time two workers would be asked to support one pensioner.

Between 1990 and 2011 the ratio already increased from 23.5% to 28.4% , meaning that today around four people are paying into the system for one pensioner.

Avenir Suisse calculated that the union's proposal would further lead to a 43% increase in contributions to the AHV for which currently 8.5% of the salary is deducted.

Elsewhere, Werner Nussbaum, pension fund expert and member of the think tank Innovation Zweite Säule (IZS) in Switzerland, has criticised a report on the second pillar currently being revised by the government following a consultation.

In a statement sent to IPE, he said that the report and the whole system of occupational pensions "lacked scientific backing".

He pointed out that the academic committee initially installed in 1996 within the commission advising the government on the second pillar law - the BVG - had been dissolved early on and that this was now visible in the quality of the report.

"An exclusion of the scientific community is a serious act of neglect which will show in a lack of quality in legislation and system implementation," he said.

Nussbaum also called on the universities to increase their research in the field of occupational pensions and establish an institute for funded pensions.

Topics