Autonomous collective foundations and full-value insurers are two options in the employee benefits insurance. Collective foundations are subject to cantonal supervision, while full-value insurers are supervised by FINMA. Does this not mean that we apply unequal regulatory provisions to these institutions with regard to solvency capital, investments or partial liquidation?
The structural reform tried to redress the previous unequal treatment. For pension funds insured at full value, the comparison is even more difficult, as these pension funds actually do not have any assets because the assets were transferred to the insurance company backing the pension fund. The insurance company is subject to regulation by FINMA, while autonomous or semi-autonomous collective foundations are independent asset holders and manage their investments themselves. In contrast to insurance at full value, the foundations can suffer an actuarial deficiency, which also explains the different effects of a partial liquidation. Basically the same rules apply, but as a full-value insurance scheme can never suffer an actuarial deficiency, partial liquidation is also never a problem. If a collective foundation on the other hand suffers an actuarial deficiency, a partial liquidation can become a problem and might lead to reduced vested benefits.
It is generally accepted that small pension funds do not have sufficient risk capacity. Do you agree?
Such pension funds are usually affiliated with a collective foundation. Here too there are two options: either the collective foundation has taken out insurance at full value to cover its investment risk, or the pension funds affiliated with the collective foundation bear the investment risk themselves. Generally it is true that the smaller the pension fund, the more interested it is in belonging to a collective foundation with insurance at full value. If a pension fund’s risk capacity is higher, a solution that allows it to partly or entirely determine its own investment strategy is more interesting.
So you would say that a bundling of pension funds does not make any sense?
No, it cannot be said in general that small pension funds should be amalgamated. Even small pension funds can belong to companies that wish to have their own pension fund. However, the concentration of pension funds shows that there is a need to join larger pension funds. This is also a consequence of the concentration seen in the business world. It is one of the strengths of our system that every company can choose what kind of pension fund it wants. The pension fund’s risk profile must suit the company, but it is unimportant whether it is a big or small pension fund.
Full-value insurance solutions are accused of not being transparent enough. Do you think it is true that financial security under full-value insurance solutions is “bought” with excessively high risk premiums, which are effectively advance restructuring contributions?
We are investigating whether risk premiums are too high as part of the reform of the retirement provision system. FINMA‘s disclosure report shows that the risk premiums that are collected are around twice as high as the risk benefits that are paid out. This should be questioned, as it seems reasonable to assume that the risk premiums finance the conversion rate. Another question is whether this problem only affects full-value insurers, or whether autonomous pension funds also have to use similar methods to cope. Nowadays it is impossible to finance a conversion rate that is too high via premiums, as this would only work if nobody ever leaves the pension fund and no vested benefits therefore have to be paid out. Risk premiums on the other hand remain with the pension fund. This leads me to believe that some autonomous pension funds also use risk premiums to finance the conversion rate.
These days we often hear about overregulation, also in the pension sector. Too much regulatory interference leads to higher costs. Should the FSIO not endeavour to minimise the regulatory hurdles as much as possible in the interests of the insured?
You are absolutely right. However, less regulation presumes that all pension fund players act exclusively in the interests of the insured. When we propose a new regulation or Parliament adopts such a regulation the intention is not to hogtie the pension funds. Practically all provisions adopted as part of the structural reform of the BVG were intended to remedy grievances at some pension funds or to protect the insured. Regulation can only be reduced if all pension fund players act in the best interests of the insured.
The requirements to be met by the trustees of pension funds are continually on the increase. Does this spell the end of the militia system in the employee benefits insurance?
As the militia system is one of the strengths of the pension funds, we must make sure that it continues. In the end a pension fund is kept afloat by the contributions of the employer and the employees, and it is important that both providers of capital can decide together what should happen with the money. I therefore attach great importance to the militia system. On the other hand, the pension funds manage around 620 billion francs in assets, and these billions must be managed with a certain amount of expertise. Trustees must therefore be required to continuously learn and educate themselves further.
At the beginning of our interview you assessed the current state of the employee benefits insurance in Switzerland. What will the next BVG revisions contribute in this regard?
The Federal Council has proposed a comprehensive reform of the retirement provision system that is designed to secure the AHV and BVG benefits. It has determined key values that we are now using as the basis for preparing the draft law. As we are revising the BVG instead of generous extra-mandatory solutions, the reforms focus only on the minimum retirement provision – and in this area there is no downward leeway. With the corrective measures proposed by us it will be possible for us to maintain the level of benefits provided by the BVG.