Factors affecting the rate of return on retirement savings in occupational pension schemes
- 5 days ago
- 3 min read
Why do some pension funds pay significantly higher interest on their members’ retirement savings than others? This question is of equal concern to members, employers and the general public – yet the answers often result in simplified rankings and sweeping judgements. A new Master’s thesis from the University of St. Gallen (HSG) now demonstrates, using a broad empirical data set, that the reality is considerably more complex.
The full study is available here (German only):
Nearly 1,000 Swiss pension institutions analysed
For his research, Renato Konrad analysed a panel dataset from the Occupational Pension Supervisory Commission (OAK BV) covering around 1,000 Swiss pension funds for the years 2020 to 2024.
Using panel regression analysis, the study examined which financial and structural characteristics explain the interest credited to retirement savings, providing one of the most comprehensive empirical analyses of interest crediting policies in Switzerland's occupational pension system.
Investment Returns Remain the Key Driver – over time
One of the study's main findings is that, within the same pension fund, the actual investment return achieved over time is by far the most important factor determining the interest credited to retirement savings. Pension funds that invest successfully over the long term while managing risk prudently create the foundation for higher benefits for their members.
This confirms a widely held assumption. However, it explains only part of the differences observed between pension funds.
Structural Differences Explain the Variation Between Pension Funds
When comparing different pension funds, a different picture emerges. Here, it is primarily structural characteristics that determine how much interest is credited to retirement savings. The most important factors are:
The proportion of retiree capital
The proportion of mandatory occupational pension savings (BVG/LPP assets)
The funding ratio
Depending on the type of pension fund, additional factors also play a role. For collective and joint pension institutions, fluctuation reserves are particularly important, as they indicate the fund's ability to absorb market volatility. For single-employer pension funds, the funding ratio is the key determinant.
The study therefore shows that the interest credited to retirement savings is neither a political decision nor an arbitrary choice. Instead, it reflects the financial and structural characteristics of each pension fund.
Why Simple Comparisons Can Be Misleading
The study demonstrates that direct comparisons or league tables of pension funds often provide an incomplete picture. Without considering structural differences, such comparisons have limited value.
A pension fund with a high proportion of retirees or a lower funding ratio operates under very different conditions from a young, well-capitalised fund. Comparing interest crediting rates alone therefore does not provide a fair assessment.
"Renato Konrad's work clearly demonstrates that simplified comparisons fail to reflect the diversity of Switzerland's occupational pension system," says Nico Fiore, Managing Director of inter-pension. "Anyone seeking to assess occupational pension funds objectively must take structural differences between institutions into account rather than focusing on individual indicators in isolation."
The Balancing Act for Pension Fund Boards
The study also highlights the challenge faced by pension fund boards each year. Crediting too much of the investment return to members while setting aside insufficient fluctuation reserves can have serious consequences during periods of market stress. In extreme cases, board members may even face liability claims.
On the other hand, crediting interest too conservatively can lead to dissatisfaction among members. This trade-off is particularly challenging for collective and joint pension institutions, which compete to attract new affiliated employers.
Conclusion: A Differentiated Perspective Instead of Simplistic Judgements
The study shows that broad statements such as "Our pensions are shrinking because pension funds invest poorly" oversimplify a far more complex reality.
Differences in investment performance do exist and can lead to meaningful differences in retirement benefits over the course of a working life. At the same time, the analysis makes clear that interest crediting practices can only be understood when the structural characteristics of each pension fund are taken into account.
Anyone seeking to assess pension funds fairly must therefore consider both investment performance and the financial and structural conditions under which each fund operates.
A stable and sustainable Swiss occupational pension system requires fact-based discussion and differentiated analysis rather than simplistic conclusions.
About the publisher
This article is based on Renato Konrad’s Master’s thesis (‘Factors influencing the return on retirement savings in occupational pension schemes’, University of St Gallen, 2026) and an analysis by inter-pension.
For further information, please contact Nico Fiore, Managing Director of inter-pension, Schwarztorstrasse 26, 3007 Bern, +41 (0)58 502 76 56, nico.fiore@inter-pension.ch.
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