Financial situation
Again in 2013, the financial markets were constantly subject to fluctuations. It is pleasing to note that the cover ratio could be maintained at 104.1% (estimate as at 12 December) in comparison with 104.4% the previous year. As at 12 December, Vorsorge RUAG achieved a rate of return of an estimated 1.9% with its assets. The value fluctuation reserve amounts to around CHF 66.5 million (4.1% of the assets). Therefore, the risk-carrying capacity of Vorsorge RUAG is still limited.

Interest in 2013 and interest rate during the fiscal year of 2014
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. In its last meeting, the Foundation Board approved interest on retirement assets in 2013 at the rate of 1.0%. 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 2014.

Our offices are closed from 23.12.2013 until 6.1.2014 Merry Christmas and a Happy New Year

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 13 December 2013. A deposit slip will be issued once the application has been checked and approved.

The contribution must be paid by 27 December 2013 so that the deposit can be entered on this year’s books and included in the 2013 tax return.

It is illegal for us to issue a tax credit certificate for 2013 in respect of payments received after 31 December 2013!

Financial situation
The development of the investment markets from the beginning of the year until May was "pleasing to good". Then June proved to be a poorer month for investments where Swiss pension funds are concerned. Pension funds have lost more than 2% in value. The expansive monetary policies of the central banks and possibly also the conflict in Syria increasingly set back the opportunities available on the capital markets. Therefore, it remains extremely difficult for pension funds to achieve the necessary rates of return. At the end of August, the cover ratio before payment of interest on retirement assets stood at 103.6%, whereas the rate of return achieved stood at 0.74%.

No pension increase in 2014
Even with a cover ratio of around 104%, it is not possible to grant an inflation adjustment. Because the target is a cover ratio of 115% (dependent on the portfolio strategy). In addition, the average rates of return since Vorsorge RUAG came into existence up to today are not adequate to cover the payment of interest on the pension capital according to the technical interest rate. Currently, interest is being paid on the pension capital at a rate of 3%. Previously this was 4.0 or 3.5%. This means that the pensions paid out already include benefit enhancements that are over the increase. However, the retirement assets of those actively insured had to have interest paid on them at lower rates due to the financial situation. In 2011 for example at 1.0% and 2012 at the minimum rate of 1.5% according to the Swiss Occupational Pensions Act. The interest rate for the current year (2013) will be set in December.

Therefore, no free funds will be available before the full risk-carrying capacity is reached (accumulated value fluctuation reserve). As a result, the statutory prerequisite to be able to adjust the old-age, invalidity, spouses' and children's pensions as at 1 January 2014 for inflation is lacking. Should the finances be available some day, then for the reasons given above, before adjusting pensions for inflation, a higher rate of interest on the retirement assets of actively insured parties would be appropriate.

Exit of Berghoff Mechanical Engineering Ltd
With retrospective effect from 1 April 2013, Berghoff Holding GmbH acquired RUAG Mechanical Engineering AG. Employees will remain insured with the Vorsorge RUAG company pension plan until 31 December 2013. Therefore, the changeover to the new pension scheme will take place on 1 January 2014. The Board of Trustees has established that the prerequisites for a partial settlement have been fulfilled and the necessary steps for a smooth execution completely in line with relevant regulations have been introduced.

Financial situation
The healthy annual return of 7.01% brought Vorsorge RUAG a coverage ratio of 104.4% at the end of 2012 (previous year: 100.8%). The trend remains pleasing in the first quarter of 2013. The estimated return at the end of March stands at 1.86%. The coverage ratio rose accordingly to 105.7% (before interest on retirement assets).

Pension capital and technical reserves
The Foundation Board has conducted a thorough examination of the report issued by the pension fund expert. As expected, the expert comes to the conclusion in his report that the pension capital and technical reserves are consistent with the regulations.

Annual accounts and annual report - cautious optimism
The Foundation Board has approved the 2012 annual accounts and annual report. Both also refer to the measures put in place in the year under review to bring financial and structural stability to the fund. There is good news and a note of caution regarding the challenges to come. Indeed, there was a direct improvement in the risk-carrying capacity of Vorsorge RUAG. There is less cause for cheer that pension losses are still being incurred. These amounted to just over eight million Swiss francs in 2012 or 0.5% of the pension capital. This figure will go down in future, however, thanks to the reduction in the conversion rate which took effect on 1 January 2013. In the meantime, however, efforts must continue and medium-term measures must be taken to arrive at a situation where those currently insured are no longer cross-subsidising those drawing pensions at all. The cross-subsidisation will not be fully eliminated until the conversion rate is no longer set too high. The annual reports and accounts will be posted to the pension payers and pension recipients in May and they will also be uploaded to the website at www.vorsorgeruag.ch.

Choice of audit body
The Foundation Board has approved PricewaterhouseCoopers Ltd to audit the accounts for the financial year of 2013.

Constitution of the Foundation Board
The newly elected Foundation Board for the 2013 to 2016 term of office assembled on 22 January 2013 for its constituent meeting. Peter Probst, who was elected to the Foundation Board by the Conference of Presidents on 16 January 2013, attended in place of Thomas Koch who will be leaving RUAG in the course of 2013.

The Foundation Board is self-constituting. It elected Urs Kiener, CFO of RUAG Holding Ltd, as President, and Alexandra Rufener, Environment & Risk Manager RUAG Defence, as Vice-President for the entire term of office.

You will find the new Foundation Board here.