St. Gallen, 9 September 2025 – Pension funds generated an average return of 7.5% last year. The exceptional returns led to a high interest rate of 3.9% on pension capital and an increase in the coverage ratio. Meanwhile, the asset allocation keeps changing: equities are climbing to a record high, while bonds are at their lowest level since the start of data collection. Despite uncertain times, pension funds have recorded above-average returns to date in 2025.
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Employees benefit from strong returns
Pension funds generated an average return of 7.5% in 2024. This is double the annual performance of the last 20 years. Capital markets as “third contributor” paid in around
CHF 85 billion last year, exceeding the cumulative contributions of employers and employees in the same period. This meant employees’ retirement assets earned an average interest rate of 3.9%, the highest rate in two decades. This solid position enabled 98% of pension funds to offer interest rates above the required minimum – also a record high. More than 20% of pension funds paid interest of 6% or more. The results underline the strength of the funded pension system. Through interest payments, employees benefit from returns in the capital markets, which in turn significantly improves benefits and ultimately pensions.
Funding ratio on the rise
The positive investment results are also reflected in the funding ratio. The capital-weighted coverage ratio rose from 107.6% to 111.8% within a year, as per end of 2024. At that point in time, only 2.9% of pension funds were underfunded, whereby these were exclusively public-law pension funds in the partially funded regime.
Increase in equities, decrease in global government bonds
Equities are now the largest asset class, accounting for 32.5% of total assets – the highest level in two decades. The increase is mainly the result of the performance of foreign equities. Pension funds actively counteracted this increase by taking profits. Fixed-income investments recorded their lowest level since records began, at 31.1%. In particular, there was a shift away from global government bonds in favour of Swiss franc bonds and global corporate bonds. The decisive factors behind the shift were rising global government debt and high currency hedging costs. The real estate quota fell slightly to 22.5%, which can be explained primarily by performance effects of the remaining assets. In contrast to equities, where most investments are foreign securities, 85% of real estate portfolios consist of domestic real estate.
Alternative investments are well established
Four out of five pension funds invest in alternative investments, which account for 10.1% of total assets. Infrastructure investments are particularly popular. These have since replaced private equity as the largest alternative asset class for pension funds. Infrastructure currently accounts for 2.8% of total allocation and is expected to continue to grow. Despite the increasing share of alternative investments and high real estate quotas, average asset management costs are falling slightly to 0.41% at present.
Technical interest rate: renewed increase
The average technical interest rate, which reflects the interest rate commitment to pensioners, has risen for the third year in a row. In 2021, it stood at 1.61% and it is currently at 1.80%. Accordingly, the pension capital of pensioners and the technical provisions dependent on the technical interest rate can be valued lower, which has positive effects on the coverage ratio.
Current developments and market environment
After a positive start into the year, the markets faced a difficult environment from March 2025 onwards. US tariffs pose various challenges for pension funds. In addition, the US dollar depreciated significantly against other currencies in the first half of 2025. Although pension funds report high investments in US dollar assets, only around 11% of capital was affected by the currency loss thanks to currency hedging. Despite these developments, pension funds remain in good shape. In the turbulent year 2025 (US tariffs, geopolitical developments, regional wars, increased government debt, etc.), pension funds generated an average return of 3.0% by the end of August, bringing the coverage ratio to 113.8%.
Practised discipline in executing the investment strategy
Our survey and practical experience show that Swiss pension funds are monitoring the investment risks they have taken on. In addition to portfolio diversification across various asset classes, important and proven risk management measures include the definition of permissible deviations from the investment strategy and the hedging of foreign currency risks.
A bandwidth concept, which is used by almost all pension funds, specifies an upper and lower limit up to which investments should be made in individual asset classes such as equities. These limits help to manage the risk of the portfolio in both bullish and bearish markets. They can also contribute to the implementation of investments in line with the strategy.
84% of pension funds hedge at least part of their foreign currency risk. Generally speaking, hedging foreign currency risks helps to keep the overall risks in the portfolio under control. Pension funds take a pragmatic approach, weighing up the reduction in risk through currency hedging against its cost.
Contact
riskcheckup@complementa.ch
About the study
The Complementa Risk Check-up Study was carried out for the 31st time in 2025. The oldest and largest independent pension fund study in Switzerland provides a representative picture of the second pillar on a recurring basis and supplies pension funds and their stakeholders with valuable insights, trends and long-term comparisons. The study team reports on key findings in May and on the overall evaluation and a special topic in September.
This year’s study is based on a data pool of 460 pension funds with assets of CHF 940 billion and covers around 80% of the investments of all Swiss pension funds. For the special topic of ‘risk management’, additional assessments were obtained from 187 pension fund managers.