A series of decisions relating taken by the board of trustees at comPlan, the pension fund for the employees at Swisscom, have resulted in a profit worth CHF60m (€56.7m), according to financial results published by Swisscom for the first nine months of the year.
The gain was recorded as a reduction of pension liabilities in the second quarter of 2021, based on a re-evaluation of the net defined benefit (DB) obligations using the current fair values of pension plan assets, in addition to current actuarial assumptions and a risk-sharing element.
DB obligations decreased by CHF784m to CHF11m as a result of the adjustment to the pension plan, positive returns on plan assets and a higher discount rate, the statement said.
ComPlan’s board of trustees has approved a number of changes in the second quarter of 2021, including a reduction of the conversion rate, compensatory measures to cushion pension cuts and a reduction in entitlements for current spouse/partner pensions, the report added.
The pension fund decided to cut the conversion rate used to calculate pension pay-outs gradually from January 2023, citing low interest rates and lower expected returns on investments as reasons for the reduction.
From January, the conversion rate for people retiring at the at age of 65 will be reduced from the current 5.34% to 5.0% in 17 months, each foreseeing a 0.02% reduction, until May 2024. The conversion rates will also be reduced in parallel for people retiring before the age of 65.
With the reduction in conversion rates, the interest rate on retirement savings will be reduced to approximately 2% from 2.7% today. This means that the younger generation in particular have the chance of higher returns on pension assets, comPlan said.
To balance the gradual reduction of the conversion rate, comPlan foresees an increase of the amount of pensions for people who work longer or retire later, even after January 2023.
The monthly increase, however, won’t remain the same during the phase of the conversion rate reduction, but the amount of pensions won’t be lower after 1 January 2023, compared with an amount received in the case of an earlier retirement.
At the same time contributions are increased to keep pensions approximately at the same amount despite a lower conversion rate. Contributions for all members aged 22 and over will be increased by 0.7 percentage points.
The changes taking effect from January 2023 reduce the redistribution from younger to older members of the pension fund without impacting on the funding ratio, it said. The majority of employees in Switzerland are insured under the Swisscom pension plan against old age, death and disability, it added.