SWITZERLAND - UBS in Switzerland is set to switch its pension plan from defined benefit to defined contribution next year, and the pension fund will make a one-off payment of CHF 760m (e482m).
Despite switching to a DC scheme, UBS spokersperson Eveline Mueller told Global Pensions the switch would not necessarily save the company money going forward. “We cannot determine what market conditions will be like going forward. We made the decision in a bid to strengthen the financial stability of the fund long term.”
UBS also announced it would lower the technical interest rate, used to value the fund’s future liabilities, from 4% to 3.5%.
“By increasing the actuarial reserve and making extra annual contributions, it will still be possible to achieve the same projected level of benefits with an average return on accumulated retirement capital of 3.5%,” the firm said.
The company also plans to decrease the AHV co-ordination amount from the current maximum of CHF 34 457 to a CHF 22 575 maximum, thereby increasing the pensionable salary, as well as annual contributions and benefits.
It was unclear what would happen to the benefits of current members under the DB plan or how much the shift would save the company going forward, and UBS was not immediately available to comment.
UBS said it would front the extra contribution costs associated with the changeover - believed to be around CHF 100m annually - so staff did not have to contribute more. The firm claimed the measures would ensure the fund's continued ability to provide competitive benefits and to guarantee its long-term financial viability, but conceded plan participants would acquire increased investment risk under a DC structure.
“The new pension model is designed to provide the same retirement benefits as the current defined benefit plan, (65% of the pensionable salary on retirement), but investment performance and changes in participants' salaries may result in these benefit targets being missed or exceeded,” the firm noted.
By Damian Clarkson
The proposed cold-calling ban may be ineffective if a collaborative regulatory approach between the UK and the European Union (EU) is not maintained post-Brexit, the Pensions Management Institute (PMI) has warned.
Some 56% of defined contribution (DC) asset managers do not believe they will have transaction cost information in time for pension funds' March year-end statements, according to Lane Clark & Peacock (LCP) research.
NEST has appointed Clive Elphick, Martin Turner, Mutaz Qubbaj and Chris Hitchen as trustee members of its reshaped board.
Most people want to avoid investing in projects that contribute to climate change, and would consider moving to another less-exposed provider, according to a survey commissioned by ClientEarth.