SWITZERLAND - Pension reforms are needed to strengthen supervision of the second pillar, liberalise the pension regulatory framework and re-orient the supervisory framework, International Monetary Fund staff have advised.
A single central office should be given the responsibility of pension supervision throughout the country to ensure uniform supervision of the second pillar, the IMF suggested.
It noted that recent Swiss proposals have suggested a redesign of pension fund supervision, with a “High Supervisory Board” issuing general directives to ensure the standardisation of regulations, while the cantons (regions) would remain responsible for supervision.
This was a step in the right direction, said the IMF, but did not adequately address variations in supervisory practices among the cantons.
With regards to the regulatory framework, the IMF said Swiss pension funds were currently constrained by regulations which weakened the risk management options of pension funds and potentially limited the long-term resiliency of the second pillar.
These restrictions do not adequately reflect changing market and demographic conditions and could be removed, it suggested.
The IMF staff added that Switzerland could look to recent reforms in the UK and Netherlands for inspiration.
For instance, welcoming recent recommendations to move away from administratively set technical parameters and restrictions, it said such reforms could be complemented by enhanced disclosure and transparency similar to the UK system.
Furthermore, it also advised a re-orientation the supervisory framework to a more risk-based system consistent with supervisory changes currently being implemented in the banking and insurance sectors under Basel II and the new Swiss Solvency Test (SST).
Here the Swiss authorities could have a look at the newly introduced Dutch system, which provided an example of this approach, said the IMF.
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