The financial situation of provident institutions deteriorated significantly in the first half of 2022, according to the latest projections. Inflation, rising interest rates, war in Ukraine and pandemic situation in China are invoked.
The average coverage rate fell to 103.4% at the end of June, the High Supervisory Commission for Occupational Pensions said on Thursday. At the end of last year, it was still 118.5%, a record.
The watchdog, however, qualified its remarks by specifying that the extrapolation rather tended to overestimate the deterioration. Indeed, the sharp rise in interest rates is not reflected in the valuation of commitments.
Multiple causes
Inflationary pressure, the resulting interest rate hikes as well as geopolitical uncertainties, including the war in Ukraine, and the pandemic situation in China have caused falls in almost all investment categories, it is indicated in the communicated.
According to calculations, 285 provident institutions are currently in a situation of under-coverage, indicates the High Supervisory Commission. At the end of 2021, there were only 13. The average return was therefore -12.3% during the first six months of the current year. For comparison, for the whole of 2021, the average net return on wealth was 8%.
Monthly monitoring
The commission monitors the financial situation of pension funds in Switzerland. On the basis of an annual survey of pension funds and data on the development of the investment markets, it draws up monthly projections.
In total, the data of 1,324 pension funds, representing a balance sheet total of around CHF 831 billion, have been taken into account in the current extrapolation.
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