Clear rules for the investment of pension assets at collective foundations

Requirements under BVV 2

How pension funds and collective foundations may invest their assets is set out in the Ordinance on Occupational Old Age, Survivors’ and Disability Pension Plans (BVV 2). The objective is a balanced, broadly diversified investment strategy that prioritises both security and returns.

Overview of key investment limits under BVV 2 (Art. 55):

• Equities: max. 50% of assets

• Bonds: max. 100%, including additional limits for non-Swiss issuers

• Real estate: max. 30% (of which max. 1/3 abroad)

• Alternative investments (e.g. private equity, hedge funds): max. 15%

• Individual risks (e.g. individual companies or debtors): max. 5% per exposure

These limits generally apply to all employee benefits institutions – including collective foundations and their individual employee benefits units.

When is a statement of reasons required?

Within these limits, foundations are free to invest as they see fit – subject to their investment regulations. While exceeding a limit does not automatically constitute a violation, it does require a statement of reasons pursuant to Art. 50 BVV 2. This means that the foundation must demonstrate that the chosen strategy is appropriate for the risk capacity and structure of the respective group of members.

For the most part, such justified divergences, which must be diligently documented, only make sense for large employee benefits units with specific requirements.

What is required for proper implementation?

Clear guidelines are essential for implementing an investment strategy in line with regulations and on a professional basis. These include:

• investment regulations governing objectives, principles, permitted investment categories and organisation

• an investment strategy tailored to the structure and risk capacity of the respective employee benefits unit

• documentation that provides a clear record of decisions, risks and results

Transparency and internal controls are just as important as external audits.

Monitoring through audits and supervision

All collective foundations are audited by authorised auditors on an annual basis. Among other matters, the auditor assesses compliance with the statutory investment requirements under BVV 2 and the correct implementation of the investment strategy.

The Occupational Pension Supervisory Commission (‘OPSC’) oversees uniform standards at the national level. It monitors the regional BVG supervisory authorities and regularly publishes reports on the financial situation of employee benefits institutions.

Direct supervision is handled by cantonal or regional supervisory authorities, some of which have joined together to form larger organisations, such as ZBSA (Central Switzerland BVG and Foundation Supervisory Authority) or Zurich supervisory region.

The accounting standard Swiss GAAP FER 26 applies, which ensures that annual financial statements are transparent, clear and comparable – including disclosures on investments.

Conclusion

The investment of pension assets is governed by strict regulations – and that’s a good thing. BVV 2 creates a reliable framework and protects members while providing sufficient scope for sustainable investment strategies. Collective foundations operating responsibly within this framework make a significant contribution to the security and stability of the second pillar.