The Sfr19bn (e13bn) Civil Service Insurance Fund (CSIF) is the pension fund for employees of the Canton of Zurich, with 55,000 active members and 18,000 retired. The fund is something of a pioneer. It was the first public sector fund to become fully funded. In 1996 it took another bold step and decided to switch from a defined benefit to DC. On 1 January 2000 it officially became a DC scheme
The main reason was the changing nature of the public sector workforce, with more job switching and more part-time and short-term working. A typical employee today will work for only two years in the public sector before moving to the private sector. All this created headaches for the managers of the Zurich canton’s DB pension plan.
Rolf Huber, the head of the pension fund, says: “Every time a salary changed the pension changed as well, sometimes several times a year. It became very complex and impossible to handle. We decided that you cannot handle that other than through a defined contribution scheme, and we looked around for what was on the market.”
The transition from DB to DC was successful but far from smooth, Huber recalls. “The changeover was a complicated operation, a very demanding process. The first plan was to implement DC in 1998, but because all the IT infrastructure had to be set up it could only be implemented two years later. It was important to get it right. In this sort of changeover you cannot make mistakes.”
There was also opposition from the unions. “They feared that the pension services would be worse than before. They also feared that they would lose the 4% guaranteed return. It was very important to convince them that would still be there.
“Now defined contribution is accepted – even by the unions. Nobody imagines changing back to the old scheme. The reason is it’s much easier to handle. Members have now what is no different from a bank account. It’s something they can understand much better than mathematical reserves. There is also greater transparency. It’s easier to find out about your plan.”
One effect of the change is that employees will take more interest in the perfomance of the funds invested on their behalf, Huber says “Obviously, members will become more interested in how their money is invested because they see the connection between the result of the asset management and their pension scheme.
However, the possibility of introducing investment choice so that members can take an active part in their pension schmes is still some way off. “The free choice of the benefit scheme where everybody chooses his pension scheme is at the moment only a vision but we are going towards this vision,” he says.
Management of the DC scheme is done in-house and by a relatively small team. Asset management and administration, supported by external custodians, is handled by a team of three, real estate by a team of six and BVK liabilities by a team of 25.
Huber believes that others will follow Zurich canton’s example. “We would not say everyone should change. The move to DC is right for the Canton of Zurich but it’s not right for everybody – it depends on the workforce you have. But I think the long term development is obvious. In a few years you won’t have anything but defined contribution plans in Switzerland.”

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