Autor: Lucas Widmer
Following a prosperous 2021, the investment year of 2022 is recorded as one of the worst, with most pension funds unable to evade this downturn. This year, we present the interest rates different pension funds are offering on retirement capital.
Performance Development of Pension Funds
According to the Pensionskassen Monitor [1], Swiss pension funds’ average total return in 2022 was an estimated -10.8%. Concurrently, the Federal Council maintained the minimum interest rate target at 1%. These conditions have strained the financial health of pension funds. While the average coverage ratio stood at a robust 122% at the year’s beginning, it dropped to 105.6% by December end, with some collective foundations ending underfunded. This scenario forces pension funds to balance between offering a higher interest rate and maintaining a comfortable coverage ratio.
Interest on Retirement Assets
The table below compares the interest rates of the largest collective foundations:
The comparison reveals a narrowing gap between the highest and lowest interest rates compared to the previous year. Leading the table, Spida and Vita typically set their interest rates in advance, thus only now benefiting from 2021’s positive results.
Excluding these two, the interest rate ratio from the lowest (PAX) to the highest (ASGA) is over 5. Semi-autonomous pension funds’ average interest rate, at 1.8%, is about triple that of full insurance models at 0.6%.
Contrary to some beliefs, a high-interest rate doesn’t always correlate with a low coverage ratio or unstable financial situation. For instance, ASGA Pension Fund, despite its high interest rate, boasts a coverage ratio over 112% as of 30.11.22, well above average. Well-performing collective foundations in previous years could afford to offer above the 1% minimum interest rate set by the Federal Council in 2022.
Interest on Retirement Assets in a 10-Year Comparison
Over a decade, interest rates among the largest collective foundations vary significantly:
The average interest rate is 1.93% per year. The gap between the highest (Profond, 3.3% per year) and lowest (Helvetia, 0.8% per year) is notable, as in the one-year comparison.
For example, an employee with CHF 500,000 in retirement assets in 2013 would have CHF 692,150 today with Profond, but only CHF 542,770 with Helvetia – a CHF 149,380 difference for the same investment!
Checking Available Alternatives
Employers and insured individuals receiving below-average interest rates in recent years should consider switching pension funds.
For companies with 50 or more employees, PARSUMO PK Fit Check offers a straightforward way to compare their pension solutions with others in Switzerland and explore improvement options. Our analysis goes beyond interest rates, considering various key figures. It’s advisable to conduct this analysis in the year’s first half to decide before the standard six-month notice period ends on June 30.
We are eager to assist you.
[1] Pensionskassen-Monitor Swisscanto Vorsorge AG, S. 4, per 31.12.2022
