Report “The 3rd contributor: strong performance underscores resilience of pension funds"

AMAS published its report “The 3rd contributor: strong performance underscores resilience of pension funds” in June. The report sheds light on the vital role the second pillar plays in the Swiss pension system thanks to the long-term effect of capital market returns and the services provided by the asset management industry. It also disproves the persistent and politicized myth that the second pillar is expensive and inefficient compared with the first. In fact, every franc paid into an occupational pension during a person’s career is tripled without any funding from the taxpayer. In addition to employee contributions, employer contributions and the third contributor bolster everyone’s personal pension assets.

In 2023, the approximately 1,400 Swiss pension funds achieved an average return of 5.1% on their assets. This equates to around CHF 58 billion on assets totaling CHF 1,120 billion or an additional contribution of CHF 11,370 (net of asset management costs) for every pension fund member in Switzerland. Since 2004, the third contributor has supplied more than CHF 500 billion or around CHF 100,000 per member.

Average asset management costs fell slightly from 56 basis points in 2022 to 49 in 2023. The report shows a clear correlation between pension funds’ net returns and their asset management costs. Over the last five years, the best pension funds achieved an average return of 5.4% despite their higher costs, whereas those with lower costs only saw an average return of 2.1%.