WTW Swiss Pension Finance Watch – Q2/2025
ZURICH / LAUSANNE / GENEVA, July 10, 2025 — After a strong first quarter of 2025, company balance sheets with respect to Swiss pensions have seen a small dip during Q2 2025. The illustrative coverage ratio dropped by 1.3 percentage points to 124.2%, according to the WTW Pension Index. The discount rate decreased by just three basis points, with minimal effect on occupational fund balance sheets. Market volatility persisted due to trade disputes, Middle East conflicts, and escalating tensions between U.S. and China. Experts continue to recommend a well-diversified portfolio with balanced sector exposure.
Pension fund assets were broadly flat in Q2 2025, while liabilities increased by 1.0% due to a slight reduction in the discount rate. As a result, the illustrative funded ratio — the ratio of pension assets to pension liabilities — declined by 1.3% in the second quarter, according to WTW’s Pension Index, which fell from 125.5% as of 31 March 2025, to 124.2% as of 30 June 2025.
Corporate bond yields were volatile during Q2 but in the end there was only a minor change in discount rate with it reducing by only 3 basis points over the quarter. This had only a modest impact on company pension plan balance sheets. Investment markets were also volatile over the quarter with typical pension fund investments dropping around 5% in the first week of Q2 but then recovering to end the quarter flat.
Following a sharp rise in Q1 2025 followed by a slight decline in Q2 2025, the discount rate has stabilized at around 1.20%.
“Swiss pension funds continue to be in strong financial positions. The system's overall resilience continues to be supported by well-established investment strategies and prudent risk management driven by timely adjustments to parameters such as conversion rates and technical interest rates over the last 5 to 10 years. On average, investment fluctuation reserves remain close to being fully funded, providing a valuable buffer against potential future market volatility,“ comments Adam Casey, Head of Corporate Retirement Consulting at WTW in Zurich.
In June, the Swiss National Bank cut rates to 0.00%, a move that was followed by the European Central Bank, which reduced its key rate by 25 basis points to 2.00%. In contrast, the U.S. Federal Reserve, maintained its policy rate unchanged at 4.25 to 4.50%, though markets still anticipate likely further rate cuts later in the year.
The first part of the year was marked by heightened geopolitical tensions, including trade disputes, conflicts in the Middle East, and escalating frictions between the U.S. and China. These developments led to significant market volatility in Q1, with the recent surge in oil and commodity prices reflecting the prevailing uncertainty. These trends continued into the Q2 quarter when the U.S. announced wide reaching tariffs triggering sharp market swings, although equity markets showed a notable recovery in June.
“Amid ongoing uncertainty, many institutional investors such as pension funds have increasingly turned to alternative assets such as private equity, infrastructure, and real assets — a strategy aimed at diversification and risk mitigation, particularly given the reduction in bond yields. Accordingly, we advise pension funds to review their strategic asset allocation, potentially replacing traditional bond allocations with other credit instruments,” says Alexandra Tischendorf, Head of Investment at WTW Switzerland. “A well-diversified portfolio, reflecting a balanced risk exposure to different economic sectors, remains important,“ she continues.
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.
