Performance, Funding Ratio and Interest Rate

Performance provides information on investment success, as represented by interest income, dividends and changes in the valuation of individual investments. It measures them in relation to assets to enable comparison with reference values such as benchmarks and sector indices.

The funding ratio measures the Pension Fund’s assets in relation to its actuarial pension liabilities. If the funding ratio is below 100%, the Pension Fund has a funding deficiency, and if it is above 100%, it has a funding surplus. A funding ratio of exactly 100% means that all the Pension Fund’s obligations can be met. If the GastroSocial Pension Fund can generate a funding surplus, it can build up fluctuation reserves, thus helping to cushion the fluctuations on the financial markets.

The BVG minimum interest rate is the minimum interest that has to be paid on pension assets by Swiss pension funds. This minimum interest rate is usually reviewed in autumn by the Federal Council and adjusted for the next year, if necessary. At the end of the year, the Board of Trustees then determines the final retroactive interest rate for the retirement assets based on the performance that was achieved as well as the provisional interest rate for the next year.

Performance:

-1.12%

(Benchmark: 0.13%)

Funding ratio:

117.3%

  

at 31/08/2020

The equity markets continued their recovery in August for the fifth month in succession. However, uncertainties regarding ongoing economic developments remained high, even if the rises in COVID-19 case numbers some countries have experienced only had a slight dampening effect on the recovery. Investors remained optimistic in light of the pro-business attitude of the central banks, the support measures taken by governments and advances in treatments and the development of vaccines for COVID-19. Having started at a very low level, inflation expectations rose somewhat in the aftermath of the change in strategy by the US Federal Reserve, leading to valuation losses on long-term government bonds. The belief strengthened that the low-interest-rate environment will persist for a very long time.
The cumulative return on our portfolio increased further, cutting the underperformance versus the ambitious benchmark, for which some of the components are defined in absolute positive terms.

The technical interest rate i is 2.75%.

The technical interest rate serves to measure future pension liabilities. It determines how much capital is required for the pension benefits that have been promised. The expected financial market developments have a strong impact on the interest rate level. The technical interest rate should not be confused with the rate of interest on retirement assets or the BVG minimum interest rate.

Quarter Performance accumulated Funding ratio
1.2020 -8.39% 109.8%
2.2020 -3.23% 115.5%
3.2020    
4.2020    

 

Interest rates 2019/2020  

Final interest rates for Pension Fund assets for 2019

(mandatory and extra-mandatory assets)

2.35%

Provisional interest rate for 2020

(mandatory and extra-mandatroy assets)

1.00%

BVG minimum interest for 2019

1.00%

The Board of Trustees will determine the final interest rates for 2020 in November 2020.

Historical performance, funding ratio and interest rate data

Performance

Average performance 2010 – 2019 = 4.83%

Funding ratio

Average funding ratio 2010 – 2019 = 112.8%

Interest rates

Average interest rate 2010 – 2019 =  1.81%

(The above figures are not guaranteed!)