Swiss SLI companies’ average funding ratio decreased by 1% in 2020 – WTW

The average pension funding ratio of the top Swiss companies decreased by 1 per cent between 2019 and 2020, according to Willis Towers Watson.

Its Pension Risk Study found that following a rapid recovery from the Covid-19 crisis in the stock markets, the average funding ratio of pension obligations of Swiss Leader Index (SLI) companies at the end of the 2020 financial year is only 1 per cent below the previous year's level. The study analysed the pension situation of 30 leading SLI companies in Switzerland.

Compared to 2019, the pension obligations of the SLI companies analysed decreased by CHF 1bn (-0.1 per cent). In the same period, the plan assets increased by CHF 3bn (+1.4 per cent), so that the aggregate funding ratio for the SLI companies rose by 1 per cent from 92 per cent in 2019 to 93 per cent (2020).

However, the average funding ratio, in which all companies are equally weighted, fell slightly from 85 per cent to 84 per cent. WTW explained this is because new companies included in the index have a lower funding ratio than those that have left. It has also been impacted by figures for two companies recorded at the height of the Covid-19 crisis as of 31 March 2020.

Commenting on the positive development in the stock market, WTW pension fund expert and senior director, Peter Zanella, said: "On the one hand, this development reflects the still record-low interest rate environment, the lack of alternatives to equity investments as well as the recovery of the real economy after the easing of measures to combat the pandemic.

"On the other hand, it raises the question of what will happen when central banks have to step off the gas to prevent the rise in inflation that is on the horizon.”

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