Social insurance schemes achieve positive investment returns in 2023
Published: Tuesday, Feb 20th 2024, 11:30
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Thanks to rising stock market prices towards the end of the year, the federal government has achieved a positive net return on assets in 2023 with the three social insurance schemes AHV, IV and EO. However, the financial balance of the AHV will only remain secure until the end of the decade.
This is the conclusion reached by Compenswiss, the Compensation Fund for Old Age and Survivors' Insurance (AHV), Disability Insurance (IV) and Income Compensation (EO). The federal institution under public law ensures that the social insurance funds are ready to pay, as well as their accounting and annual report.
On Tuesday, Compenswiss presented its investment result for 2023, which it said was "pleasing", "solid" and "good" overall at 4.98%. In contrast to the previous year, the performance was positive again. In 2022, the return was negative at almost 13 percent.
Profits despite unstable situation
The reason for the better result last year was the rising stock market prices towards the end of the year, Compenswiss wrote. From October onwards, most asset classes developed positively.
Nevertheless, the reporting year was difficult due to geopolitical tensions and economic uncertainties. Compenswiss cited the wars in Ukraine and the Middle East, as well as inflation and interest rates, as challenging factors. These had caused great instability on both the bond and equity markets.
According to Manuel Leuthold, Chairman of the Board of Directors, Compenswiss benefited in particular from the positive development of its equity and bond positions denominated in Swiss francs, but also from its currency hedging strategy.
Balance between security and yield
Compenswiss intends to continue its current investment policy, as the head of the institution announced. On the one hand, the aim is to maintain sufficient liquidity at all times so that the three social insurance funds can meet their payment obligations. On the other hand, the assets should be invested in such a way that the best possible balance between security and a return in line with the market is guaranteed.
In 2023, the institution decided to exclude companies whose turnover from coal-fired power plants exceeds a threshold of 15 percent. As a member of the Swiss Association for Responsible Investment (SVVK), Anstalt continued the shareholder dialog and took normative exclusions as a final measure.
As at December 31, 2023, the total assets of the three social security funds amounted to CHF 40.596 billion, compared to CHF 37.282 billion a year earlier. The assets under management consisted of fixed assets, which amounted to CHF 37.691 billion (previous year: CHF 34.599 billion), and cash and cash equivalents (treasury), which amounted to CHF 2.905 billion (previous year: CHF 2.683 billion).
Need for reform from 2030
Regardless of the market situation, positive returns will not be sufficient to secure the long-term financing of the AHV and IV compensation funds. Due to demographic trends and the ageing population, the gap between income and expenditure is widening every year.
The AHV fund is currently still benefiting from two reforms, specifically the Federal Act on Tax Reform and AHV Financing (Staf) and AHV 21 with the increase in the retirement age for women and VAT. Compenswiss wrote that the additional income resulting from these reforms will secure the AHV's financial balance for another six to seven years.
The operating results of the three social insurance schemes AHV, IV and EO for 2023 will be published in April 2024.
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