The purpose of the reform is to generally strengthen pension plan regulation. Accordingly, stricter requirements have been introduced for 2nd pillar stakeholders. Transparency in pension plan administration has also been improved to avoid possible abuses. The corresponding provisions are spelt out in the BVV2/OPP2 amendments.

Persons in charge of pension plan administration or pension asset investments also have to satisfy specific ethical criteria. These include a good reputation, a flawless business record and no conflicts of interest. Moreover, any legal transactions concluded between a pension plan and a related party have to be disclosed and examined by the auditors. Any financial advantages which a person or institution may derive from his or its activities on behalf of a third-party pension plan must be passed on to the pension plan concerned. In addition to front running, are prohibited parallel running, after running and the use of insider information from securities transactions on behalf of a pension plan. Administrative costs are to be disclosed in greater detail than previously in the financial statements. To ensure compliance with the new governance requirements, additional sanctions have been introduced in the BVG/LPP.

Stronger regulation for pension institutions

The duties of the auditor, accredited pension actuary and pension board are more clearly described and their obligations reinforced. The direct oversight over domestic and international pension institutions currently exercised by the Federal Social Insurance Office is transferred to the cantons. The higher oversight is to be exercised by an independent watchdog commission which is to have a professional secretariat. The supervisory commission will be responsible for ensuring uniform supervisory practice and the stability of the second pillar system. There will no longer be any federal oversight. Independent cantonal supervisory authorities must now be established as public entities with their own legal personality. The structural reform will strengthen the trend towards regional regulation. Today, two regional covenants (eastern Switzerland and central Switzerland) already exist; more are planned. Because of these structural changes, a whole series of amendments have to be made in the BVV1/OPP1.

New legal requirements for BVG/LPP investment foundations

The structural reform extends the scope of the legislation for the first time to investment foundations. The new ordinance on investment foundations circumscribes the circle of authorised investors, additions to and use of pension assets, investments, bookkeeping, accounting procedures and auditing, investors' rights and the corresponding organisational aspects. The provisions are basically aligned with existing practice. Investment foundations are under the oversight of the supervisory commission.

The governance and transparency rules are due to come into force on 1 July 2011 while the provisions on the new supervisory system and the ordinance on investment foundations should become effective on 1 January 2012. The supervisory commission will also start work then.

Strong opposition to the new rules

The implementing ordinances are the cause of considerable discontent, especially on the part of investment foundations. Many see the new rules simply as an “exercise in bureaucracy” making the oversight of the second pillar much more cumbersome and expensive. The fact that the changes requested by the BVG/LPP commission during the consultation process were virtually ignored and that voting was dispensed with in the final hearings was also criticised.

Soaring charges for pension institutions

The planned oversight system will generate much higher costs for pension institutions. For the time being, the supervisory authority for central Switzerland (ZBSA) charges pension institutions about CHF 6,000 to check their annual financial statements. Those charges will soar in future.

The claim that the new structure will avert investment scandals is merely wishful thinking. The oversight is too far removed from pension institutions to do that. Ultimately, rules can always be circumvented. If anyone can detect fraudulent investments with pension plan assets, it is the accredited pension actuary or a pension plan's own auditor. They are much closer to those in charge of the pension plan than any supervisory authority will ever be.

The consultation process has started

Swiss pension institutions have until 28 February 2011 to take a position on the planned ordinance amendments. ASIP, the association of Swiss pension institutions, has so far taken the view that new rules should not stifle all attempts at responsible and innovative leadership. On the contrary, new rules should only be introduced where necessary and practicable. The room for manoeuvre of the joint administration board should not be further restricted.