Despite recording good returns over the last 10 years, pension funds in Switzerland rarely transfer profits over to the insured, a study by the largest Swiss trade union has revealed. As funds continue to grow in value, pensions in Switzerland have stagnated, and many have been forced to accept pension cuts.

Pension fund profits not transferred to pensioners in Switzerland, union says

The Swiss Trade Union Federation (SGB) found that, despite recording high profits in pension funds, individual pensions have been falling in value over the last 10 years. The SGB accused pension companies of valuing financial security over the income of pensioners. 

Between 2010 and 2020, the technical interest rate - the predicted returns on investment for pensioners - fell to around 1,5 percent a year. Meanwhile, the average returns made by the UBS and Credit Suisse pension funds were over 5 percent in the same period.

Pension profit held in cash reserves and not given to insured

According to the SGB, pensioners did not benefit from this rise in profit. In fact, the union said that the average monthly pension of a newly retired man has shrunk from 2.300 Swiss francs in 2015 to less than 2.100 in 2020. 

Instead of flowing into pensioners' pockets, the SGB found that most of the profit went into cash reserves in Swiss banks. By the union’s estimates, 111 billion Swiss francs were held in reserve by pension providers in Switzerland in 2020, 450 percent more than in 2011.

Pension providers say they are only building up cash reserves for crises

In response, pension provider Tellco pkPRO said, "The insured benefit directly from the positive return on investments." The Swisscanto pension foundation said that every Swiss franc earnt by the company remains in the system and belongs to pension holders. 

According to Roger Baumann, an entrepreneur from the consulting firm c-alm, "The trade unions hide various aspects. They are right that the performance of the pension funds in recent years has been significantly higher than what was passed on to the insured. But they falsely suggest that the insurers simply made a profit for themselves."

Swisscanto said that the increase in cash reserves was to safeguard benefits and ensure financial stability. They noted that the financial crisis of 2008 made it necessary to create a cash buffer to survive future crises, and with inflation set to rise dramatically, Baumann said, "We can only be happy that the [funds] are so healthy financially."