Financial crisis: are Profond’s assets safe?
Impressum: Herbert Brändli, Chairman of Board of Trustees, Profond Pension Fund
The entitlements of Profond scheme members are not in any way under threat despite the market turbulence.
Before we start we should remind readers that all members of BVG schemes are protected by the State Security Fund both in the event of their employer becoming insolvent vis-à-vis the pension institution and in the event of the pension institution itself becoming insolvent. If a pension fund were no longer able to provide its benefits, the Security Fund would take over its obligations in its place, at least in respect of insured salaries up to around CHF 120,000.00. Needless to say, this state safety net also applies to all members of the Profond scheme who pay annual premiums for this purpose.
The entitlements of Profond scheme members are not in any way under threat despite the market turbulence. Our current incoming deposits and contributions are considerably higher than our current outgoings. This means that Profond will always be able to meet its obligations from this continuous inflow of liquidity, while at the same time positioning itself advantageously with accumulating liquidity surpluses so that it can respond appropriately on the investment side once there is a change in market conditions.
The upheavals on the stock markets are naturally also having an impact on Profond’s assets. Price losses are resulting in falling book values and hence in a lower reserve ratio. Affiliated partners who terminate their contracts to the end of the year must therefore expect their lump-sum payment from the partial liquidation of their assets to amount to less than 100% of their retirement savings. Over the long-term, though, Profond members need not expect any loss of benefits since no Profond assets are under any acute threat.
On the contrary, our policy of steering clear of leverage and less-than-transparent structured products and of concentrating on quality in the equity segment and valuable real yields in the interest segment means that Profond’s portfolio stands to benefit more than most from the visible rediscovery of fundamentals. The current cleansing processes taking place in the financial sector also offer opportunities which Profond will exploit as and when they present themselves. It has set aside sufficient liquidity in its balance sheet for this purpose.
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