Liberty News - Swiss pension funds generate high administrative costs

In the occupational pension system, the costs for administration and asset management total 6.8 billion francs per year. Each insured person therefore pays 1,500 francs a year. Is that too much?

In 2021, pension funds managed assets of around 1200 billion Swiss francs. The insured must pay for this. But how much are they actually paying for their money to be managed in the occupational pension system? And are the pension funds reporting this transparently? The Swiss Federal Audit Office has now investigated these questions.

Costs amount to 1500 Swiss francs per insured person and year

Pension fund costs for administration and asset management total CHF 6.8 billion per year. For an insured person, they amount to an average of 1,500 francs. François Donini, evaluator at the Swiss Federal Audit Office, is astonished at the level of administrative costs, as he told "Tagesschau". When they broke down the amount by means of indicators to the funds, however, it became apparent that the differences were very large depending on the pension fund.

Incentives to reduce costs are lacking

In fact,  costs in the 2nd pillar are a political issue. Politicians on the left think the costs are far too high, partly because they are lower in the 1st pillar. They also find it problematic that costs are rising unchecked and that there are no incentives to reduce them. They demand a reduction in profit sharing, and a reduction in costs.

Even center-right politicians consider the costs to be high. However, they put it into perspective that 0.46% asset management costs are in balance, and much better than investing your money yourself. They concede however, that the pension funds would have to negotiate even better with the banks in order to further reduce costs.

In its report, the Swiss Federal Audit Office also criticizes some pension funds for taking too little account of costs while making  their decisions.

Pension fund association points to respectable net returns

The Swiss Pension Fund Association does not accept this criticism. "Anyone who only looks at the costs of pension funds is doing a disservice to the insured," says Hanspeter Konrad, Director of the Swiss Pension Fund Association ASIP, on the Tagesschau. And he continues: "What is decisive is what comes out at the bottom line, the so-called net return. In this respect, pension funds must not hide their light under a bushel."

Insured persons have a right to information on costs

As far as transparency is concerned, the Swiss Federal Audit Office is calling for greater sensitivity to costs on the part of all parties involved. This may also be applied to the insured, who have the right to know the costs. But they must also demand this right.