Current Challenges in Occupational Pensions

Column by Alain Grand

Volatile markets, unclear monetary policy, demographics and digitalisation present major challenges for the industry.

At the end of 2024, pension funds managed assets of CHF 1,129 billion – a dimension that shows how important the second pillar is for financial security in the country. Developments in the 2nd pillar affect not only professionals, but society as a whole.

In the picture: Alain Grand, Specialist manager in Pension solutions at Tellco

Investment Strategy in the Current Market Environment

2024 was a strong investment year for Swiss pension funds, with an average return of 7.6%. However, 2025 already presents a different picture: geopolitical tensions, monetary policy uncertainties and a generally more nervous market environment have significantly increased volatility. For pension funds, this means they once again have to contend with more pronounced short-term fluctuations, without losing sight of their long-term objectives.

As Head of Pensions at Tellco, I am closely monitoring developments. From my perspective, the key is to act with a clear and risk-conscious investment strategy. Those who implement their strategy with discipline and do not allow themselves to be guided by short-term fluctuations lay the foundation to remain reliable even in challenging times.

Clear Conditions in the Interest Rate Environment 

Another factor of uncertainty concerns monetary policy. Should the Swiss National Bank once again enter a phase of negative interest rates, this would present pension funds with particular challenges. The period of negative interest rates (2015–2022) clearly demonstrated how severely pension funds can suffer under asymmetric conditions (compared with other financial actors) – in particular due to the obligation of liquidity and the absence of tax-free allowances.

This is why it is important to ensure uniform conditions in the future. If all financial actors are subject to the same requirements, there is also greater planning certainty – a central point when it comes to long-term pension obligations.

Demographic Change in a Competitive Environment

Competition in the occupational pension (BVG) market is fundamentally positive. It fosters innovation and ensures that costs remain low in the interests of the insured. At the same time, however, it must not result in certain companies with an older or more health-burdened workforce being systematically disadvantaged.

The rising life expectancy and ageing of the Swiss population is a central issue: according to the Federal Statistical Office, life expectancy in 2023 was 82.2 years for men and 85.8 years for women. At the end of 2023, 1.73 million people aged 65+ were living in Switzerland. For every 100 people of working age (20–64), there were 31.8 people aged 65+, with the old-age ratio rising for years.

Compensatory mechanisms that ensure stable conditions are therefore all the more important. Here, collective risk pools or age-independent contribution systems can help to distribute the burden fairly. A balanced level of competition means that all participants can operate in the market under comparable conditions, regardless of the age structure of their insured members.

Digitalisation as an Ongoing Task

Digitalisation also continuously affects the second pillar. Employers and employees today expect digital platforms that are fast and user-friendly. At the same time, the demands on data protection and IT security are increasing.

For pension funds, this means investing specifically: in secure platforms, automated processes and skilled professionals who can implement these technological developments. The implementation of the revised Data Protection Act also places high demands on technology and organisation.

Digitalisation is therefore not a project that will one day be completed, but an ongoing process. Those who act consistently here not only improve efficiency but also strengthen the trust of the insured.

Looking Ahead

In an environment full of change, what is ultimately needed is stability. This ensures that the second pillar not only meets today’s requirements, but will also stand the test of time for future generations.