Last April, the Swiss Chamber of Pension Fund Experts adopted the revision of DTA 4/FRP 4, the guideline on the technical interest rate (TIR), which applies to all financial statements from 31 December 2019 and onwards.
Subsequently, the High Surveillance Commission (CHS-PP) has validated this directive as a minimum standard requirement for all pension funds.
WHAT IS THE DTA 4 SAYING?
A TIR cap (upper limit) will replace the current reference interest rate, i.e. the TIR will have a fixed cap which shall not be exceeded for single pension funds. This upper limit for valuations at 31.12.2019 amounts to 2.13% if generational tables and 1.83% if periodic tables are used.
The recommended TIR must be below the effective return on assets in the long term with an appropriate margin and can be maintained over a longer period of time.
The accredited expert must consider the structure and other characteristics of the pension fund when determining the technical interest rate.
Pensioner-heavy pension funds shall apply a TIR which is close to a low risk interest rate considering the duration of the pension liabilities.