WTW Swiss Pension Finance Watch – Q1/2025
ZURICH / LAUSANNE / GENEVA, April 15, 2025 – Company balance sheet positions related to Swiss pension obligations saw significant improvement in the first quarter of 2025 despite a downturn in assets towards the end of the quarter. A sharp increase in the discount rate was only slightly offset by a modest reduction in asset values, resulting in a 4.7% rise in WTW’s pension fund index since the start of the year. As the outlook becomes more complex due to global tensions, industry experts recommend careful monitoring and a proactive, flexible approach.
Pension fund assets experienced a slight decline of 0.6% during Q1 2025, while corporate bond yields rose by approximately 33 basis points compared to the end of 2024. As a result, the illustrative funded ratio index—the ratio of pension assets to pension liabilities – visible in WTW’s Pension Index, improved to 125.5% as of March 31, 2025, up from 120.9% at the end of 2024.
The persistent decline in bond yields and corresponding fall in discount rates between the end of 2022 and end of 2024 were interrupted by a small jump in bond yields in Q1 2025. This resulted in projected benefit obligations (PBOs) seeing a notable reduction of 4.3%. However, following the Swiss National Bank's (SNB) decision to lower its key interest rate by an additional 0.25 percentage points in Q1 2025, this increase may only be short lived.
After a strong 2024, during which many Swiss pension funds benefited from robust investment returns, most occupational pension schemes in Switzerland entered 2025 in a solid financial position. However, despite this favorable starting point, experts are urging caution. Mounting economic tensions between the United States and other global economies, coupled with growing political uncertainties, are increasingly weighing on financial markets.
Attention is now turning to how global volatility may impact investment performance – and, in turn, the funding status of pension plans. "The current tensions across global markets serve as a clear reminder of how quickly conditions can shift," says Adam Casey, Head of Corporate Retirement Consulting at WTW in Zurich. "The equity market downturn and increase in Swiss bond yields late in Q1 both seem to be attributed to growing global political tensions and the associated uncertainty they have created."
While many pension funds remain well-positioned at the beginning of the year, sustained market instability could pressure long-term returns. Strategic reassessments of portfolio risk, hedging strategies, and liability management may become increasingly important as the year progresses. As the global outlook becomes more complex, industry experts recommend a proactive approach—monitoring capital markets closely, staying informed on policy shifts, and maintaining dialogue between corporate finance teams and pension fund managers.
In the first quarter of 2025, only the SNB proceeded with another rate cut. On March 20, 2025, it lowered its key interest rate by an additional 0.25 percentage points to 0.25%, further emphasizing its accommodative stance. In contrast, the European Central Bank (ECB) and the Federal Reserve (Fed) kept their interest rates unchanged during this period. The Fed maintained its target range at 4.25% to 4.50%, despite political pressure, citing ongoing economic uncertainties and inflation risks.
Central banks aim to stimulate economic growth and stabilize financial conditions by lowering borrowing costs. As accommodative policies persist, pension funds and investors are advised to remain flexible and adjust strategies to respond to a dynamic market.
The recent decisions by President Donald Trump to impose extensive import tariffs on a range of goods from various countries have caused significant turbulence in the global capital markets. While these measures aim to correct trade imbalances and bolster domestic production, equity markets anticipate the long-term negative impacts of tariffs on the global economy.
Pension funds are directly affected by these market fluctuations. Since the U.S. stock market holds a dominant share in the global MSCI World Index, recent losses in equity markets could impact the performance of Swiss pension funds, especially if markets remain volatile or recover slowly.
"The ongoing uncertainty regarding U.S. trade policy could further increase volatility in capital markets. Pension funds and other institutional investors are therefore advised to regularly review their portfolios and adjust as necessary to diversify risks and mitigate potential negative impacts. Careful monitoring of political developments and their economic consequences remains essential," says Alexandra Tischendorf, Head of Investment at WTW Switzerland.
Swiss Pension Finance Watch reviews quarterly how capital market performance affects pension plan financing in Switzerland. The study is part of the Global Pension Finance Watch from WTW which includes results back to 2000 for major retirement markets worldwide. The results are published quarterly with a focus on linked asset/liability results. It covers pension plans in Brazil, Canada, the Euro-zone, Japan, Switzerland, the U.K., and the U.S.
The impact of capital markets on these pension plans is two-fold:
WTW’s model defines a benchmark pension plan that is intended to be representative of the pension liabilities and plan assets (including asset mix) that are typically found in each global market. The impact of movements in capital markets on assets and liabilities is combined to produce a Pension Index which reflects the movement in the funding level of the benchmark pension plan.
