Investment & Pensions Europe
July 30, 2013
By Jonathan Williams
Swiss bank UBS has closed its UK pension fund to future accrual, according to the company’s quarterly report for the three months to June.
In its report, the bank said the closure had been announced during the second quarter.
However, a spokeswoman for the bank told IPE that it was not a matter of a public announcement taking place, but rather the remaining active members being informed during Q2 that the scheme would be closed to future accrual. [EXPAND Read more]
The closure would appear to be linked with the bank’s drive to comply with incoming Basel III capital requirements, as the only mention of the career average scheme’s “freeze” – previously closed to new entrants – was made in a section of the quarterly report dedicated to the common equity tier 1 (CET1) capital requirements.
UBS said its CET1 capital had decreased by CHF800m (€650m) in the three months to June and largely attributed the change to its UK defined benefit fund.
The report continued: “In the second quarter of 2013, UBS announced its decision to freeze the UK defined benefit (DB) pension plan.
“While this change did not affect our fully applied BIS Basel III CET1, it resulted in a reduction of our phase-in BIS Basel III CET 1 capital, which is still based on IAS 19 Employee benefits.”
The report did not disclose updated estimates of its Swiss and international pension obligations, instead referring to the calculations in its 2012 annual report.
According to the annual report, its Swiss pension fund saw its funding ratio, as set by Swiss law, increase over the course of 2012 to 123.4%.
This was despite a 0.4 percentage point decrease in the applied discount rate to 1.9% that led to an additional cost of CHF730m.
It did not offer a detailed breakdown of its obligations outside Switzerland, instead only reporting a CHF990m deficit in its international pension funds holding assets of CHF3.7bn at the end of December.
When assessed under IAS 19, the CHF21.7bn Swiss fund reported a small, CHF118m shortfall.
Concerns over the impact of Basel III have in the past motivated Allied Irish Bank to shore up its DB deficit with the transfer of a €1.1bn loan book, as the revised banking regulations will deduct pension deficits from the bank’s capital before calculating the capital ratio. [/EXPAND]