Definitive interest on Capital in Pension Plan (incl. ER Account) and Capital Plan 2021

After the pandemic shock of 2020, the markets defied all headwinds in 2021. Rising inflation rates, higher energy prices, supply chain disruptions, turbulence in China's property market, nor the uncertainties associated with the advancing pandemic – none of these developments dampened investor sentiment for very long. At the end of the year, this resulted in considerable gains in equities. Not so for fixed-income securities: bond prices fell, primarily due to an increasingly cautious US Federal Reserve.

In this environment, the Pension Fund achieved investment returns in the high single digits.

Definitive interest rate for 2021 applied to retirement savings capital in the Pension Plan and ER Account

The Pension Fund Board decided the following at its meeting of 2 December 2021:

1. The ordinary interest rate to be applied to the mandatory and extra-mandatory portions of retirement savings capital in the Pension Plan and the ER Account shall be 1.5% with retroactive effect from 1 January 2021, matching the 1.5% interest rate currently guaranteed on the retirement savings capital for pension beneficiaries.                                                                                                                                                        
2. Moreover, the pro forma return on investment reported for 2021 allows redressing some of the redistributions from insureds to pension beneficiaries in recent years without undermining the long-term financial stability of the Pension Fund.                  A compensatory interest rate of 6.5% shall be applied to the mandatory and extra-mandatory portions of the retirement savings capital in the Pension Plan and the ER Account for 2021. This permitted honouring, in 2021, the Pension Fund Board's commitment to set future interest rates with due regard to the inequity afforded to different generations through past de-risking measures.

Insureds and beneficiaries of salary replacement benefits or a temporary disability pension

The 1.5% ordinary interest rate and the combined 6.5% compensatory interest rate apply to all those who were insureds (meaning active, non-retired members) on 31 December 2021 as well as all members who were drawing salary replacement benefits or a temporary disability pension on 31 December 2021. Members who joined during 2021 will receive both the ordinary and compensatory interest rates applied pro rata. The total interest amount is credited to the retirement savings capital on 31 December 2021.

Definitive interest rate applied to savings capital in the Capital Plan for 2021

The Pension Fund Board confirmed the interest rate to be applied to savings capital in the Capital Plan for 2021 will remain at 0%.

Insureds benefit from a capital interest rate guarantee for the Capital Plan. This means that when the Capital Plan is paid out (for example upon leaving the company, retirement, death, 100% disability), the insureds receive at least their contributions and buy-ins plus any interest awarded by the Pension Fund Board (calculated over the entire membership period). Furthermore, they can benefit from the performance of the "UBS AST2 EA Kapital Plus 2019" fund. In the event of benefits being paid out, insureds will always receive the higher of the two amounts – the value of the savings capital or the value of the fund units. This means that insured members have no risk of loss due to price falls but can enjoy 100% of price increases.

Interest rate to be applied during the year to retirement savings capital in the Pension Plan (incl. ER Account) for 2022

Due to the low interest rate environment, the Pension Fund Board will retain its cautious interest rate approach for 2022. At its meeting of 2 December 2021, the Board therefore decided to set the interest rate to be applied during the year to retirement savings capital in the Pension Plan for 2022 at the BVG minimum interest rate and therefore at 1%.

Interest rate to be applied during the year to savings capital in the Capital Plan for 2022

Due to the capital guarantee, the Pension Fund Board decided to set the interest rate to be applied during the year to savings capital in the Capital Plan for 2022 at 0%.