The Federal Social Insurance Office (BSV/OFAS) has published a legal opinion on its website which addresses the issue of negative interest on vested benefit accounts: can a vested benefits institution that is charged negative interest pass on this charge to customers who have opted for a conventional account solution without securities?

The Opinion was prepared by Prof. Dr. Jacques-André Schneider and Céline Moullet, attorney-at-law with the Geneva law firm Schneider Troillet. The Opinion is available in French and can be downloaded at www.bsv.admin.ch.

According to this Opinion, negative interest cannot be charged to holders of conventional interest-earning vested benefit accounts. The reasoning is based on the fact that conventional account solutions provide that vested benefit accounts are interest-bearing. To satisfy the interest crediting obligation, the vested benefit institution must generate the necessary funds without involving the client. Even if the vested benefit institution decides "to generate the necessary interest using conventional collective investments", such investments are outside the scope of the account-holder's responsibility and only serve to fulfil the (interest crediting) obligations of the vested benefit institution. The collective investment practiced by a vested benefit institution corresponds to a "pure savings solution" within the meaning of Article 13(5) FZV/OLP (Swiss Federal Ordinance on vesting in pension plans).

Liberty Foundation for Vested Pension Benefits has taken due account of these circumstances for some time and does not apply negative interest, or any other account management charges, to its conventional vested benefit accounts.

Moreover, our account solutions ensure a broad risk diversification since the assets are automatically spread over a significant number of banks. The distribution can be viewed at: http://www.liberty-vorsorge.ch/en/vested-benefits-foundation/liberty-account/distribution-formula/. Spreading assets over several banks increases security and considerably reduces bankruptcy-related risks.