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In our SLI® Pension Benchmarking Study 2023, we examined the pension plans of 26 out of the 30 companies included in the SLI (Swiss Leader Index) stock market index in the year 2023. This study, conducted by WTW every two years, highlights trends in occupational benefits.
As we are all aware, our society has experienced significant changes in the past few years, including a pandemic outbreak, conflicts in Europe, and large inflation increases globally. These events have had drastic impacts on our financial markets, which in turn have influenced pension benefits offered by the SLI companies.
Let’s closely analyze the movement of the financial markets over the past 5 years, as investment returns are an important source of income for pension funds. Often, pension funds pass on a portion of their returns to active members in the form of interest credits on their vested benefits. In 2019, 2020 and 2021, investment returns had solid years of positive returns, indicating the potential for high interest rates. Several companies seized this opportunity and provided interest credits significantly higher than the minimum, partically in 2021 with an average interest credit of 6%. However, by 2022, circumstances took a turn, and the markets experienced a significant drop, leading to investment returns of less than -10% (see also our article about Changing Times). Nevertheless, many pension plans continued to provide more interest to their active members than minimally required, showing their commitment to aiding employees in saving for retirement. On average, the SLI companies granted around 3% interest each year to the retirement savings of active members over the past 5 years, slightly higher than the average asset return of 2.6% per annum.
We are pleased to observe that despite the fluctuations in the financial markets, benefits at retirement remained relatively stable across the last three SLI studies (conducted in the years 2019, 2021, and 2023). While retirement pensions experienced a slight decrease due to lower conversion rates, the overall retirement lump sum increased slightly because of higher contributions from both employers and employees.
As we continue to look ahead in the ever-changing financial landscape, we are left with curiosity about how these trends will shape pension benefits for the SLI companies in the future. The past five years have already demonstrated the importance of adaptability and resilience for pension solutions.
Read the entire study report here.
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