Capital markets defy expectations
Things turned out differently because the US Federal Reserve made an about-face in its interest rate policy. After turning the interest rate screw upwards in 2018, it refrained from further rate hikes in 2019 and cut the key interest rate three times by a total of 0.75%. This not only boosted equities, but also drove up bond prices. The most important stock markets around the world gained between 20% and 30%, and in Switzerland and the USA even slightly more. Interest rates, on the other hand, fell to new lows. Low interest rates were also supported by barely noticeable inflation.
Provisions in the amount of 57 billion Swiss francs
Thanks to this positive environment, the pension fund achieved an extraordinarily high performance of 8.3% last year. However, since we have a rather low equity exposure compared to other pension funds, we are still lagging behind the benchmark. In addition to an attractive interest rate of 2.75% on employees' retirement assets, 57 billion Swiss francs will be used to reduce the technical interest rate from 1.75% to 1.25%. As a result, the pension fund will need lower returns in the future to secure its pension obligations, and the continuing low interest rate environment will be taken into account. The high investment return will thus be used to a large extent to secure the pension obligations. The coverage ratio of the pension fund increases from 106.9% at the end of 2018 to a solid 111% at the end of 2019.