The Pension Fund Swiss Re at 100

Pension fund contributions are a salary component today, but this was not always the case. Initially, this form of pension provision was reserved for a small pool of people.

The first pension funds were created in the public sector and covered teachers, police officers and civil servants. Many municipalities followed in the latter half of the 19th century. Banks and insurers were among the first private-sector employers to provide their workforce with a retirement pension. During and after World War I, the government provided tax incentives to induce businesses to establish pension funds for their employees. The strategy paid off: while in 1903 there were perhaps 100 pension funds, by 1941 there were more than 4 000.

3  The Pension Fund Swiss Re at 100

Swiss Re has had a benevolent fund since the 19th century and as such ranks among the pioneers in employee pension provision. A lump sum was paid out to managers and employees upon their retirement or, in the event of their early death, to their surviving dependents. In 1914, when it turned 50, the Swiss Reinsurance Company introduced a provident fund for retirement and disability pensions. The Pension Fund Swiss Re in its current form was established on 28 June 1919 as an employee provident foundation and endowed with CHF 1 088 168.70 in accumulated savings from the provident fund. After three years, the Pension Fund had a membership of 93 female and 143 male employees. Married women were not eligible for membership. Upon completing three years of service with the company, the retirement and surviving dependent benefits were provided in the form of a life insurance policy concluded with the life and pension insurer Schweizerische Lebensversicherungs- und Rentenanstalt. Male employees earning an annual salary in the CHF 3 000 to CHF 4 999 range, for example, received a sum insured of CHF 7 000. Female employees were granted a sum insured of CHF 4 000 flat, regardless of their salary. Employees with 12 or more consecutive years of service also received a retirement and disability insurance pension policy.

In 1948, in the wake of much political turmoil, a national retirement pension scheme known as AHV (Alters- und Hinterlassenen-Versicherung) was introduced in Switzerland. On 1 July 1949, the Pension Fund Swiss Re adjusted to this change, adopting a provision in its regulations that defined an extensive benefits package in alignment with the AHV. Irrespective of the number of years of service, insureds now were entitled to a lump-sum amount, a retirement or disability pension as well as widows’ and orphans’  pensions. Insureds were also covered for illness and accident. In those days, the Pension Fund took over the payment of salaries for 18 months. Today, the Pension Fund pays salaries for a maximum of 18 months once the continued salary payment from Swiss Re ceases. Thereafter, the Pension Fund pays a temporary disability pension in line with the federal disability insurance scheme tables. 

The Director and Chairman of the Supervisory Board of  Swiss Re for many years, Charles Simon also played a defining role in the history of the Pension Fund. 

In another aspect also, the Pension Fund was well ahead of its time. Long before this was required by law, the Pension Fund gave employees a lump sum from the technical reserves when they left the Pension Fund after accumulating a certain number of years of service.

The Pension Fund assets grew quickly, and asset allocation requirements changed accordingly. By 1929, the investment portfolio included real estate, and from 1957,  also securities – the latter due to high inflation at the time and the currency depreciation involved. In 1968, the Pension Fund formulated its first asset allocation strategy, whereby 70% of assets were invested in property  (20% equities and 50% real estate) and 30% in fixed-interest securities. From the 1970s, one-third of assets were authorised for investment in foreign securities. Since 1997, the strategy has been defined by an asset management committee. 

Pioneers

4  The Pension Fund Swiss Re at 100

In the 1970s, the Pension Fund gradually went professional in its organisational structure and operations. At the dawn of that decade, the regulations were amended to allow also married women and part-time employees to join the Pension Fund. The amendments also expanded membership to include Klubhaus restaurant employees, allowed buy-ins to make up for missing contribution years and introduced the option of early retirement. In 1973, the Pension Fund’ s board of trustees – the first to include both employee and employer representatives – issued organisational and business regulations. Five years later, Rudolf Oberle was appointed as the first official managing director. From 1978, pensions were paid out by bank transfer only and no longer in cash.

The 1980s and 1990s were marked by changes to legislation. With the mandating of occupational retirement, survivors’  and disability pension plans under the BVG act in 1985, the original employee provident foundation was split into three foundations: the Statutory BVG Foundation, the Voluntary Pension Fund Foundation for Extra Benefits and the Pension Fund.

Extensive further amendments to the regulations were required in 1995 with the passage of vested benefits legislation (Freizügigkeitsgesetz, FZG). For example, the amendments reduced the entry age from 30 to 25, introduced the entitlement to benefits following divorce, allowed making an advance withdrawal or pledging the capital accrued in the Pension Fund to purchase residential property for the insureds’  own use, established equal treatment of women and men in the event of death, and introduced a widow’ s pension. 

Around the turn of the millennium, the Pension Fund took  its organisation and processes to the next level of professionalisation. In 2000, a Capital Plan was introduced to reflect the new performance-based compensation system of Swiss Re. A year later, the Pension Fund published its  first-ever annual report, and from the following year, survivor benefits were extended also to same-sex couples living in cohabitation. 

Going professional

In the post-World War II era, new hires were issued an informative booklet on Swiss Re corporate culture. The booklet also explained the benefits offered by the Pension Fund. The handsome illustrations were by Hans Tomamichel. 

Mythenquai on the Zurich lakefront, with the Altbau headquarters (centre) in about 1929.

The Regulations of the Pension Fund Swiss Re have continued evolving over the years. Shown above is a detail of the cover page of the 1936 version. 

5  The Pension Fund Swiss Re at 100

2007 ushered in a major change when the Pension Fund switched from a defined-benefits to a defined-contributions scheme. Whereas retirement benefits previously depended on the insured salary, they now were calculated based on each individual’ s accrued savings capital. Under the new scheme, employees also shouldered some of the savings contributions. To absorb some of the impact, Swiss Re gave all employees a 7% pay rise. At the same time, the normal retirement age for women and men was raised to 63.

The global financial turmoil also left its mark on the Pension Fund Swiss Re. To protect the Pension Fund assets, the equity weighting was reduced to 10% in 2008. Even so, there was no way to avert an impact on the funding ratio, which at 107.7% was down 19 points from the end of the previous year. In response to the financial crisis, central banks around the world lowered their interest rates.

For the Pension Fund Swiss Re, the persistent low interest rates created a challenging investment climate reflected in lower technical interest and conversion rates. Between 2011 and 2019, the technical interest rate was reduced from 3.5% to 1.5% (2019) and the conversion rates, too, were lowered over the same period. The impact of these reductions was mitigated by generous funding allocations from Swiss Re.

In 2015, the Pension Fund Swiss Re switched periodic tables for generation tables as the actuarial basis for its calculations. Retirement pensions are now determined at conversion rates based on a member’ s year of birth. The resulting reduction in the retirement pension was offset by raising the normal retirement age to 65 for women and men.

While life expectancy in Switzerland has been rising steadily for many years, the persistent low interest rates are reducing the Pension Fund’ s investment returns. The accrued retirement savings capital and long-term investment returns are no longer sufficient to finance retirement pensions converted with a significantly higher actuarial rate. The Pension Fund therefore uses some of its investment returns to cover these shortfalls. This leaves less of the investment returns to be applied to the retirement savings capital of active insureds, resulting in a redistribution from active to retired members.

A further reduction in the technical interest rate to 1.5% currently, linked to a 2.5% increase each in employer and employee contributions, is one of the measures taken to help minimise the intergenerational redistribution and to ensure the financial stability of the Pension Fund in the long term. Additional changes introduced with the 2019 Regulations allow insureds to align the benefits from the Pension Fund Swiss Re with their individual pension requirements and chosen lifestyle, for example through pre-financing of voluntary early retirement or options for the level of survivors’  benefits at retirement age. 

Low interest rate environment  requires adjustments

1969 saw the inauguration of the Neubau office building.

6  The Pension Fund Swiss Re at 100

The Pension Fund Swiss Re board of trustees, June 2019.

Photo by Stephan Birrer

7  The Pension Fund Swiss Re at 100

In February 2011, Swiss Re announced a new holding structure comprising three standalone Business Units.

The internal staff memorandum on the introduction of BVG insurance shows the white-on-blue Swiss Re logo in use at the time.

Pension certificate from the early years of the Pension Fund Swiss Re

To accommodate its growing workforce in Switzerland, Swiss Re expanded to a second location in Adliswil in addition to its Mythenquai site. In 1998, Tüfihaus opened. Swiss Re has since sold the building and moved out in 2018 as part of its plans to concentrate its employees at the new Campus Mythenquai.

Photo by Fredi Lienhardt 

As part of the Swiss Re 150 Years celebrations, an event was held for retired employees in December 2013.

Photo by Ben Felden

Pension Fund Swiss Re Mythenquai 50/60 P.O. Box 8022 Zurich Switzerland

Telephone + 41 43 285 6200 E-Mail pensionskasse_swissre@swissre.com www.pensionskasse-swissre.ch/en

Sources

  Archive, Pension Fund Swiss Re  Historical Archives, Swiss Re

© 2019 Swiss Re. All rights reserved.