SWITZERLAND - The majority of Swiss pension schemes failed to meet the 2.5% minimum guaranteed interest rate last year, exposing flaws in the Swiss system, according to Watson Wyatt.
The report showed pension funds only achieved median annual returns of 1.8% in 2007 - a 0.7% shortfall on the minimum guaranteed interest rate of 2.5% set by the government in 2007.
Dr Edouard Stucki, senior consultant, Watson Wyatt, commented: "The folly of the whole system has been exposed, as the Federal Council set the credit rate this year to be 2.75% and it wasn't [actually] achieved last year."
The report showed average returns over the past three and five years were 6.6% and 6.9% respectively, although it stressed a lack of homogeneity between individual schemes.
The impact of the sub-prime crisis was also clearly reflected in the report: while the median annual returns were 1.8% for 2007, in the first half of the year the median performance was 9.9%.
André Haubensack, director of sales, Switzerland, New Star Asset Management, told Global Pensions: "The fact that the year was broken up into two halves - the first positive, the second anything but - leaves us to conclude that overall, while it wasn't a good year, it doesn't really matter as we'd expect long term yields to return close to [the historic levels of] around 6.5%."
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