Monday, May 29, 2006

IMF on Swiss pensions supervision [CH]

NZZ in its Saturday Reflexe points us to the Concluding Statement of the IMF Mission dating back to March, which we've completely missed. Not only do the IMF staff underline the need to extend working life further, in line with increased life expectancy.

More importantly, they will look further into several second pillar issues, namely -
  • understatement of underfunding due to discounting of liabilities with non-market-based interest rates,
  • fragmented cantonal supervision, opening up opportunities for regulatory arbitrage,
  • regulatory distortions relative to the insurance sector, because regulation is not risk- and market-based as in the insurance industry.

  • From an international practitioner's standpoint, these are all valid issues that deserve close examination. Regulatory arbitrage is a fact, as is the lack of a fair value based approach to funding issues.

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