A recent report by the government that collected data from a sample of Swiss pension funds shows a significant deterioration in the financial health of Switzerland’s 2nd pillar pension funds over the first half of 2022. Inflation, higher interest rates and falling stock markets have hit the fortunes of the funds.
By the end of June 2022, 285 of the funds included in the survey owed more than they were worth, a phenomenon known as under coverage. The average coverage ratio fell 15.2 percentage points from 118.5% to 103.4%.
The 285 pension funds with a funding hole made up 22% of the 1,324 2nd pillar pension funds surveyed. At the end of 2021 only 13 were in negative territory.
The change is down to negative investment returns. Many fund managers failed to forecast recent downwards shifts in the market. Overall returns for the first half of 2022 were -12.3% compared to 8% over the course of 2021.
The 1,324 funds covered by the survey manage around CHF 830 billion of employee savings.