Financial situation  
The Foundation Board has been pleased to note the satisfactory trend in the financial markets throughout 2012. As at the end of November 2012 Vorsorge RUAG achieved an estimated return of 6.7% on its investments and therefore a pleasing coverage ratio. This was only just in the positive at the end of 2011 at 100.8% but had reached an estimated 105.5% by the end of November 2012. After interest on retirement assets at the minimum rate of 1.5% under compulsory pension legislation (BVG), it comes to around 104.7%. This increases the value fluctuation reserve from around CHF 12 million at the beginning of the year to a little over CHF 70 million. The risk-carrying capacity of Vorsorge RUAG is still limited, however. 

Interest in 2012 and interest rate during the fiscal year of 2013  
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. The recommendation put forward by the Foundation Board in 2008 applies as a guideline in this case, with interest on retirement assets at a rate of between 0% and the BVG minimum (2012 = 1.5%) given a coverage ratio of between 100% and 105%. In its last meeting, the Foundation Board approved interest on retirement assets in 2012 at the minimum BVG rate of 1.5%.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 1.0% for 2013. 

Coordination deduction with effect from 1.1.2013  
In line with the economic trend, the 0.86% increase in OASI/disability pensions with effect from 1 January 2013 will be matched in the coordination amount, equating to CHF 210 and therefore an increase from CHF 24,360 to CHF 24,570. Vorsorge RUAG is not under any obligation to make this adjustment but the move is advisable. The Foundation Board has therefore approved the increase.As a result, the insured earnings will not be reduced for persons insured to date. It will remain at the current level until such time as the full increase in the coordination amount (+ 0.86% or CHF 210) is recouped by wage increases. This policy will guarantee the higher insured earnings even if the wage increase should turn out to be lower than the increase in the coordination deduction.

Foundation Borad: employee representatives elected for the period of office 2013–2016

Insured members of the Vorsorge RUAG fund were given details of the procedures governing the election of employee representatives to the Foundation Board in August 2012. The employee representative conference of presidents, which supervises the election process, confirmed the election of the nominated candidates.

The election office congratulates the following on their election:

Alexandra Rufener (1973), re-elected
Environment & Risk Manager
RUAG Schweiz AG, RUAG Defence division

Hugo Gerber (1955), re-elected
Staff representative of the staff association 'transfair'

Eric Wiesmann (1978), new
Manager Sales BU Mechanisms
RUAG Schweiz AG, RUAG Space division

Thomas Koch (1959), re-elected
Sales Director South America
RUAG Schweiz AG, RUAG Aviation division

Thomas Koch is leaving RUAG in spring 2013 and will therefore be stepping down from the board. In accordance with the voting rules, the employee representative conference of presidents will nominate a replacement.

For the election office:

Carmen Schmidhalter
Chair of the election office

Corrado Tedeschi
Managing Director

Voluntary contributions may be made twice a year in order to increase retirement assets and insurance benefits. The application (Form E2) must be submitted by 14 December 2012. A deposit slip will be issued once the application has been checked and approved.

The contribution must be paid by 27 December 2012 so that the deposit can be entered on this year’s books and included in the 2012 tax return.

It is illegal for us to issue a tax credit certificate for 2012 in respect of payments received after 31 December 2012!

Financial situation
The stock markets made an astonishing recovery in the second quarter from the setback at the beginning of June. The pleasing trend held until the end of August, as is also reflected in the Vorsorge RUAG portfolio. The coverage ratio before interest on retirement assets stands at around 105% and the return at around 6 %. It is highly debatable whether the upturn in the financial markets will continue until the end of the year. A volatile autumn is expected. Indeed, economists are predicting a major recession in the USA. Efforts are still being made to find solutions to the financial crisis in the southern European countries.

No pension increase in 2013
Even with a coverage ratio of around 105 %, the conditions are not met to grant an adjustment for inflation. The target coverage ratio to meet this requirement is 115% (depending on the investment strategy). Moreover, the average returns achieved between 2001 and 2012 do not suffice to pay interest on the pensioners' capital sums at the applied interest rate. Note: 3% interest is currently paid on the pensioners' capital sums. It used to be 4.0% and 3.5%. A less favourable rate of interest had to be paid on the retirement assets of those currently insured, however, due to the financial situation. It was 1.0%, for example, in 2011. The interest payment on the retirement assets of those currently insured will be set in December for the year 2012.

There are no spare funds available before full risk-carrying capacity is reached (increased fluctuation reserve). Hence there is no capacity to meet the statutory requirement to be able to allow for inflation with effect from 01 January 2013 in respect of old-age pensions, disability pensions and pensions for surviving dependants. Should the financial situation allow it at a later date, then a higher interest rate on the retirement assets of those currently insured shall be announced before granting an adjustment for inflation, as set out above.

Have you received your July 2012 pay slip and are wondering why your contribution to the pension fund is higher?

As advised in May 2012, contribution rates increased on 1 July 2012. This measure is as a result of the drop in the conversion rate due on 1 January 2013.

Further information can be found here.

Financial situation  
There was something of an upturn in the financial markets in the first quarter of 2012, only to be followed by a slowdown towards the end of May. The return of 3.7% attained by the end of April could not be sustained until the end of May and settled back down to the 3.4% mark. The coverage ratio before interest on retirement assets was therefore estimated at 103.3 % as at the end of May 2012. 

2012 Foundation Board elections  
The Foundation Board will have completed its current term of office at the end of 2012. It will therefore be necessary to hold the elections before the end of this year in order to appoint the employee and employer representatives who will take up office from 1.1.2013 to 31.12.2016. The four employer representatives will be elected by the Executive Board of RUAG Holding Ltd at the request of the group management. The four employee representatives will be elected by the relevant Conference of Presidents. An office will need to be set up in the run-up to the elections for the employee representatives for the preparations and for the actual voting procedure. 

In connection with the forthcoming elections, the Foundation Board has now approved a profile of requirements for employee boards, named 31 October 2012 as the election date, and has appointed the election officers, namely Ms Carmen Schmidhalter, RUAG Holding Ltd, lawyer; Ms Manuela Gröning, RUAG Holding Ltd, Corporate Treasurer; Mr Corrado Tedeschi, Managing Director Vorsorge RUAG (ex officio). The persons insured will be informed about the voting procedure by the end of August at the latest.

Financial situation  
At the end of 2011 the Vorsorge RUAG pension fund had a coverage ratio of 100.8%. The fact that the coverage ratio was just over 100% was due, on the one hand, to the strong December performance on the financial markets with a return of +1.90% and, on the other hand, to the decision to set the interest on retirement assets below the minimum interest rate under compulsory pension legislation (BVG) at 1%. The trend remains pleasing in the first quarter of 2012. The estimated return at the end of March stands at 3.60%. The coverage ratio rose accordingly to 103.9% (before interest on retirement assets). 

Major challenges tackled head on
Last year we repeatedly drew attention to the various problems surrounding occupational pensions, adding that the Foundation Board was busy seeking solutions. The Foundation Board acted swiftly in approving a package of measures at its meeting in December 2011. At its April 2012 meeting it endorsed the practical preparations which had been made in the meantime by the Management Board and the pension fund expert. The aim is to minimise risk and to thus ensure the sustainability of the fund. The approved measures will directly improve risk-carrying capacity and, in the longer term, will minimise the extent to which those currently insured are cross-subsidising those drawing pensions. The applied interest rate will drop from 3.5% to 3% on the basis of the new BVG 2010 principles, which will be adopted at the same time as the change from the period table to the generation table. Some initial outlay will be required: the change in the basic principle and the reduction of the applied interest rate will cost the fund some CHF 84 million. The lion’s share - just over CHF 65 million - will be paid by the corporate pension fund foundation of the employer RUAG. The other CHF 19 million will come from provisions. This measure will stabilise the fund financially and structurally. The change to the new basic principles of BVG 2010 and the application of the generation table with an interest rate of 3% will bring about a reduction in the conversion rate. This is set to drop continually into 2017 from its current level of 6.4% to 5.8%. As previously mentioned, this will reduce the extent to which those currently insured will be cross-subsidising those drawing pensions. The negative effects of the reduction will be cushioned by other strategic measures. A one-off deposit of CHF 20 million, for example, would soften the blow of pension cuts. The savings premium rates will also have to be increased in order to maintain the target of 60% at the age of 65. In the course of negotiations, management and labour have agreed on equal shares for employer and employees. 

Employees, employer and the fund itself will contribute to this package of measures. This will guarantee that, despite the difficult situation, Vorsorge RUAG will continue to be able to honour its obligations in full.

Those currently insured will be sent a personal letter in May containing detailed information and explanations.

Partial settlement of Nitrochemie Wimmis AG

The follow-on contract with Nitrochemie Wimmis AG was terminated by the Foundation with effect from 31 December 2011, inducing a partial settlement on the same date. This affects 180 people with vested benefits of just over CHF 32 million. The Foundation Board has now become privy to the liquidation accounts and has sought information on how to proceed.

Choice of audit body

The Foundation Board has approved PricewaterhouseCoopersAG for the financial year of 2012.

By way of a replacement for Hans Bracher, who has retired, the Executive Board of RUAG Holding Ltd has appointed Dr. Christian Ferber, Head of Corporate Human Resources, as Employer's Representative on the Foundation Board.

As a member and president of various foundations set up by previous employers, Christian Ferber already has at his disposal extensive specialist knowledge of pension provisions.

We wish him every satisfaction and much success in his new, responsible office.