93

**Table** **<u>38  PF City of Zurich:  Early Retirement Ages and Conversion Factors, 2005</u>** Retirement Age 65 64 63 62 61 60 59 58 Conversion Factor (in %) 6.89 6.72 6.56 6.42 6.28 6.15 6.02 5.90 Source: Pensionskasse Stadt Zürich (2004), p.26, Tab. 3

The bridging pension may equal up to the maximal amount payable under the AHV/AVS. As a consequence, the accumulated old–age credit balance is reduced by the present value of the bridging pension less the part that is sponsored by the employer. The reduction can be compensated by a lump–sum payment.

Investment: The investment strategy of the pension fund of the City of Zürich is focused on a high long run return on assets and global diversification. The assets are chosen in a way as to benefit from the global real economic growth. As a consequence, the portfolio (at 31.12.04) contains a high fraction of foreign shares (33.7 percent)<sup>83</sup> , in particular from emerging markets, but also hedge funds (4.6 percent) and private equities (1.9 percent). Other instruments are domestic currency bonds and foreign bonds (27.4 percent and 12 percent, respectively), domestic shares (8.2 percent), real estate (9 percent), and commodities (2.2 percent). The investment strategy is complemented by a relatively high level of reserves.

Common with most other pension funds, there are no explicit investment strategies to hedge mortality risks directly. The accrued liabilities computed with constant mortality tables are augmented by 0.5 percent each year. FIF mortality tables are used.

# **PF SBB (Swiss National Railways)**<sup>**84**</sup> **:**

_The pension fund of the Swiss national railway company (SBB) was founded in 1906. Since 1999, it is organized as a foundation under private law. It covers almost 28,000 active contributors and over 30,000 retirees, from 12 affiliated companies. The majority of the insured are organized in a defined benefit system. This system covers insured incomes up to 100,000 CHF. The maximum pension equals 60 percent of the last insured income. Early retirement is possible from the age of 58 years onwards. Up to 50 percent of the capitalized pension can be withdrawn as a lump sum. Income above the level of 100,000 CHF is managed in a defined contribution system, where up to 100 percent of the accumulated capital can be withdrawn as a lump sum. With total assets amounting to 11.5 billions CHF in 2004, the pension fund of SBB is one of the biggest pension funds. Since liabilities related to old–age benefits - computed with a technical interest rate of 4 percent - exceed total assets by 2.3 billions CHF the funding ratio is only slightly above 83 percent, which is considered as a heavy underfunding._ Early Retirement: Early retirement at SBB is possible at age 58. The ordinary pension is proportional to the length of the contribution period. For each year of contributions the pension increases by 1.5 percent of the insured wage, but it cannot exceed 60 percent (=40*1.5%). Early retirement between 62 and 65 does not result in a reduction of

> 83This number exceeds the 25 percent specified in the law. The reason is that investment requirements do not bind in the non-mandatory part of the scheme. 84c.f. Pensionskasse SBB (2004)