Both Pension Plans 1 and 2 of the Zurich Insurance Group (PP 1 and PP 2) are intended to provide occupational provision for the employees of Zurich (and the companies associated with the latter) in Switzerland by insuring these against the economic consequences of age, death and disability. Both pension plans have the legal form of a foundation within the meaning of Art. 80ff. ZGB (Swiss Civil Code), are entered in the register for occupational provision and pay contributions to the security fund (PP 1: register no. ZH 340, PP 2: register no. 331).
Pension Plan 1 of the Zurich Insurance Group insures the employees, whilst Pension Plan 2 of the Zurich Insurance Group insures the members of the executive staff of Zurich in Switzerland. The regular statutory retirement age is 65 in PP 1 and 62 in PP 2.
Autonomy and defined contribution
Both of the pension plans are completely independent. They therefore bear all the risks themselves – regardless of whether the risks are actuarial or investment risks. They operate two provision schemes – the basic plan and the additional savings plan – for old-age benefits in the defined contribution plan.
Basic and additional savings plan
The basic plan is intended to finance old-age benefit at the regular statutory retirement age. The additional savings plan makes it possible for the insured person to increase savings capital and use this to finance in full or in part firstly an old-age pension up to the maximum amount in accordance with the purchase tables in the event of early retirement as well as secondly to finance a bridging pension until the regular AHV retirement age has been reached.
Savings contributions and retirement savings in the basic plan
Both, the insured persons as well as the affiliated companies, pay savings contributions to finance the old-age benefit in the basic plan. The total of the savings contributions corresponds with the retirement savings, which are credited to the insured persons. They are determined as a percentage of the insured salary and depend on the age of the insured person.
Voluntary contributions by insured persons in the additional savings plan
Insured persons can make contributions on a voluntary basis from their own private funds to finance the additional savings plan. If the available old-age savings in the basic plan do not reach the maximum amount possible, insured persons can make voluntary contributions from their own private funds to the basic plan.
Risk benefits and risk contributions
As part of the basic plan risk benefits for the risks of death and disability are insured additionally, which are defined in accordance with the defined benefit plan (percentage of insured wage) and are financed by a risk contribution by the insured persons and the affiliated companies.
Retirement savings capital / technical reserves
On 31st December 2009 Pension Plan 1 held retirement savings in the amount of CHF 1'106.6 million for active and disabled persons and actuarial reserves in the amount of CHF 1’056.0 million for retired persons. Besides it has created technical reserves for longevity, for the risks of death and disability as well as for pending disability cases and for the waiver of contributions by the disabled. These reserves are periodically recalculated by recognised pension fund experts. On 31st December 2009 they amounted to CHF 100.7 million in Pension Plan 1.
Pension Plan 2 held on 31st December 2009 retirement savings in the amount of CHF 293.9 for active and disabled persons and actuarial reserves in the amount of CHF 251.7 for retired persons as well as technical reserves for the same purpose as in Pension Plan 1 in the amount of CHF 25.2 million.
Investment reserves and funding ratio
In 2009 the two pension plans recorded an outstanding net return on investment in excess of 10% (after deducting asset management and administration costs). Retirement savings paid 3.5 percent interest in 2009, with «only» 2.5 percent of the interest being funded from the pension plan assets. The guaranteed minimum interest rate for creating the pensioners’ actuarial reserves is 3.5 percent. The 2009 underwriting result ranged between balanced (PP2) and slightly positive (PP1). As a result, the funding ratio of pension plan 1 increased from 100.1% as at December 31, 2008 to 107.7% as at 31st December 2009, while pension plan 2 increased from 98.0% as at 31st December 2008 to 105.5% as at 31st December 2009. Thus, in 2009, both pension plans were again able to form value fluctuation reserves of CHF 173.9 million (PP1) and CHF 31.2 million (PP2) respectively.
Number of active insured persons and pensioners
Pension Plan 1 of the Zurich Insurance Group had 6’247 active insured persons and 2’977 pensioners and Pension Plan 2 of the Zurich Insurance Group had 589 active insured persons and 289 pensioners on 31st December 2009.
Assets of the pension plans
The assets totalled CHF 2’441.9 million in Pension Plan 1 and CHF 602.3 million in Pension Plan 2 on 31st December 2009.
The highest governing bodies of the foundation are the two boards of trustees. They manage the trusts in accordance with the deeds of foundation as well as the legal, supervisory law and regulatory provisions and instructions. The boards of trustees have appointed a business management for the operative implementation of the mission of the foundation. This is chaired by the executive director. The boards of trustees have appointed an investment committee to invest the assets of the pension plans, which is headed by the chairman of the investment committee. The board of trustees has also appointed an investment controller to control investment activity. Finally, the board of trustees has also appointed a controller (auditor), as well as a recognised pension plan expert in accordance with statutory stipulations.