The CHF12.6bn (€11.2bn) public pension fund for the Swiss canton of Geneva will be recapitalised with CHF4.4bn but without structural changes after a public vote on Sunday.

The funding level at the Caisse de prévoyance de l’Etat de Genève (CPEG) will reach 75% as a result of the recapitalisation, bringing it closer to the 80% level that it must reach by 2052 under federal law.

However, voters rejected the government’s proposed change to CPEG’s structure, from defined benefit (DB) to defined contribution (DC).

Both the government and opposition parties supported a recapitalisation plan, but only the government’s proposal included the DB to DC switch. Voters approved both plans, but more were in favour of the opposition’s plan. The turnout was reported to be 45%.

CPEG indicated relief at the outcome as the result averted a potential “catastrophic” double rejection. However, as a precautionary measure it noted the vote could be contested.  

“We are pleased that a solution has been found to allow the fund and its members to approach the future with more peace of mind,” it said in a statement.

The cantonal government lamented that voters had opted for a proposal that did not provide for structural reform of CPEG, saying it hoped new recapitalisation measures or benefit cuts would not be necessary in the coming years. The law approved by the referendum would come at a higher cost to the canton than the government’s proposal, it said. 

How it will work

The mechanism for the bulk of the recapitalisation is fairly complex, involving a long-term loan from CPEG to the canton, to be reimbursed in the form of real estate assets – land for development or construction rights for housing in the Praille-Acacias-Vernets (PAV) area.

If this were to lead to real estate accounting for more than 45% of CPEG’s overall assets, cash or other “contributions in kind” would have to be made, according to the text of the approved law.

The government said the text would not allow any construction in the PAV area beyond what was already agreed. The PAV area is the focus of a plan to redevelop railway and industrial land to address a housing shortage in Geneva and surrounding municipalities.

Speaking to IPE before the referendum, CPEG’s chief investment officer Grégoire Haenni said a recapitalisation would have an impact on the scheme’s asset allocation and the investment portfolio’s expected return, but the investment strategy would not change.

In a national ballot yesterday Swiss voters backed a proposal to pump CHF2bn into the state pension scheme on an annual basis from next year. The provision was included in a reform of corporate tax rules that would also scrap preferential rates for multinational corporations. 

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