Financial situation
After the pleasing development in the stock markets in October and November, the anticipated year-end rally did not materialise, causing a fall at Vorsorge RUAG in the return of around 3% as at the end of November to an estimated 2% in the middle of December. The coverage ratio before interest on retirement assets remains roughly at the level of the previous year at around 103.4%.

Despite the volatile financial markets and persistently low interest rates, the return generated to date can still be labelled as attractive owing to the low equity exposure in comparison with other pension funds.

Interest in 2015 and interest rate during the fiscal year of 2016
The market-consistent valuation of the pension capital and the low investment risks are having a positive effect on the interest on retirement assets of those currently insured, because this situation has actually enabled the Foundation Board to set the interest on retirement assets in 2015 at the BVG minimum rate of 1.75%. It is therefore higher for the second time in a row than the interest on pension capital of 1.5%.

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 2016.

Reconstitution of the Foundation Board
Alexandra Rufener, Vice-Chairwoman and employee representative, already notified the Foundation Board in the middle of the year of her intention to resign with effect from 31 December 2015. The Foundation Board and Executive Board would like to thank Alexandra Rufener for her service to the Foundation and to those currently paying into the system and those already drawing pensions.

The conference of employee representative presidents of RUAG Switzerland exercised its powers as the relevant election body and voted in Sabina Bieri, Communication Specialist, as her successor. She will take over the existing term of office. Like her predecessor, she comes from the Defence division. We would like to welcome Sabina Bieri aboard.

The Foundation Board also elected employee representative Eric Wiesmann Vice-Chairman.

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 18 December 2015. A deposit slip will be issued once the application has been checked and approved.

The contribution must be paid by 29 December 2015 so that the deposit can be entered on this year’s books and included in the 2015 tax return.

It is illegal for us to issue a tax credit certificate for 2015 in respect of payments received after 31 December 2015!

Financial situation
Developments in the financial markets ran counter to each other in the first and second quarters. Some parts of the bond portfolio and the listed property investments produced a positive return in the first quarter as a result of the decisions taken by the Swiss National Bank (scrapping of the euro exchange rate ceiling and introduction of negative interest rates). The second quarter, by contrast, was dominated by trends in the other direction, including slight rises in interest rates and falling stock markets. By the end of July the return was 2.42% but this was virtually wiped out by the very poor figure for August of -1.70%. Seen from January to August, the return is just in the plus at 0.68%. The all-clear signal cannot be given. The financial markets are still very erratic.

The coverage ratio before interest on retirement assets is at 102.8%, bringing the fluctuation reserve down to around 2.8%. Therefore, the risk-carrying capacity of Vorsorge RUAG remains limited.

No pension increase in 2016
Based on the current coverage ratio of 102.8%, the barely positive return by the end of August 2015 and the limited risk-carrying capacity, the conditions are not met to grant an adjustment for inflation with effect from 1 January 2016 in respect of old-age pensions, disability pensions and pensions for surviving dependants.

Financial situation
As of 31 May 2015, Vorsorge RUAG achieved a return on its investments of 2.25%. This corresponds to an actuarial coverage ratio of 104.9% before interest on retirement assets. The economic coverage ratio as of the end of May amounts to 88.3% and the risk-bearing coverage ratio is 99.6% (for an explanation of terms see the 2014 Annual Report, page 37).

Internal Control System (ICS): no action required
In order to guarantee the effectiveness of the extensive checks and balances, an annual self-assessment is conducted in the second quarter based on a detailed and comprehensive list of questions. This assessment did not produce any findings which would have required any measures to be put in place.
Whether or not the internal checks and balances are adequate given the size and complex nature of Vorsorge RUAG is determined by the external auditors during the checks made during the interim audit and the final audit.

Compliance
Compliance means adhering to all applicable laws, regulations and standards in order to prevent legal sanctions, financial losses and damage to reputation. The Compliance Regulations, which were brought into force in September 2014 by the Foundation Board, stipulate how to handle all issues relating to compliance. The Executive Board reports to the Foundation Board at least once a year: amongst other things, it states that all foundations required under the Compliance Regulations exist and that the corresponding guidelines have been adhered to.

Financial situation
The technical coverage ratio at the end of the year was 103.4%. This rose to 106.0% because of the 2.87% return before interest on retirement assets in the months of January and February 2015.

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 law and regulations.

2014 financial statements and annual report: a worthwhile read
The Foundation Board has approved the 2014 financial accounts and annual report. The pension losses are one of the issues explained in detail. The Foundation Board reduced the valuation interest rate from 2.5% to 1.5% with effect from 31 December 2014 for the valuation of the pension obligations. The conversion rates were not lowered at the same time to a correct level on an actuarial basis hence the ensuing pension losses. They amount to 16 million Swiss francs for 2014 which corresponds to 0.9% of the pension capital. In other words, 30.6% of the benefits of the employees who went into retirement last year are not covered and will have to be defrayed from the return to the detriment of the coverage ratio. Further steps are thus still required to stabilise the financial position.

The annual report and the financial statements were uploaded onto the website www.vorsorgeruag.ch in May and offer further interesting news about occupational pension schemes.