VORSORGE UPDATE
Having obtained a good return, the Foundation Board is able to make some changes to various interest rates. In 2014 interest will be paid on the retirement assets at a rate of 2%. The interest rate for the valuation of the pension obligations will be reduced from 2.5% to 1.5% with effect from 31.12.2014.
Financial situation
The financial situation of Vorsorge RUAG has been characterised this
year by positive stock markets, very low interest rates (10-year bonds
at end of November 2014: 0.41%) and a pleasing trend in the listed
property investments.
With an estimated return of 10.4% as at 15.12.2014, the coverage ratio increased from 101.5% at the end of 2013 to 109.7%. The target
coverage ratio is 115% with a fluctuation reserve in line with the
investment strategy, therefore the risk-carrying capacity remains
limited.
Interest rate in 2014 and interest rate during the fiscal year of 2015
The interest rate for the current year is set at the end of the year.
The advantage of this is that the decision can be made in hindsight,
knowing the financial situation and the return generated. This has
allowed the Foundation Board to set an interest rate of 2% on the
retirement assets for 2014, which is above the minimum interest rate
under compulsory pension legislation (BVG) (1.75%). However, there is
still a need to set an interest rate applicable to events during the
coming fiscal year, such as staff departures and retirements. This will
be 0.5% for 2015.
Valuation interest rate as at 31.12.2014
It was mainly the low interest rates which pushed the return up to a
high level. That is to say, the return did not come through interest
income but through the higher valuation of the bonds on account of the
prolonged reduction in interest rates on the financial market.
The pension obligations are assessed at the valuation interest rate,
which is currently 2.5%. The assets which are sensitive to interest
rate movements can be apportioned to those drawing pensions and
therefore a reduction in the valuation interest rate is advisable. This
will bring the valuation interest rate into line with the lower market
interest rates and make it more reflective of reality. These
considerations are behind the decision of the Foundation Board to lower
the valuation interest rate to 1.5% with effect from 31.12.2014. This
reduction will place a burden on the annual accounts in the order of
about CHF 100 million and reduce the coverage ratio by an additional 6% after year-end interest. The positive effect is that the annuity
reserves will no longer be subject in future to higher rates of interest than the retirement assets of those currently insured.
Amendment of investment regulations
The Foundation Board has revised the investment regulations to take
effect on 1.1.2015 on account of the Swiss Federal Council ordinance on
the Minder initiative (requirement of pension funds to protect
shareholders' rights) and amended the Occupational Pension Ordinance
(OPO) 2 investment provisions.
Choice of audit body
The Foundation Board announced the audit contract again for the
financial year of 2015. The previous audit firm PricewaterhouseCoopers
AG (PwC) was successful in winning the contract. It was chosen for the
accounting year of 2015 and retained to conduct the audit.
Our offices will be closed from 22.12.2014 until 5.1.2015
Merry Christmas and a Happy New Year!