Tellco pkPRO is a semi-autonomous collective foundation. The risks of disability and death have been reinsured with an insurance company. The retirement capital is managed dynamically but conservatively, and our portfolio contains a relatively high equity component (18% to 25%). This allows us to earn a higher yield in the long term, even when markets are very volatile. The process of investing the pension capital is a closed system: the employee benefits assets and income earned on these assets remain with the foundation and benefit only the insured.
Generally speaking, a funding deficiency can occur, but if the coverage ratio falls below 90%, rehabilitation measures are immediately instigated. To avoid a funding deficiency in the long term, surpluses are used, among others, to raise a value fluctuation reserve.
In contrast to the so-called capital guarantee granted by life insurance companies – which only covers a certain percentage of an investment, subject to the requirement that 10% of the investment income be passed on to the insurance – the investment model applied by the collective foundation Tellco pkPRO has the potential to earn a bigger return with lower costs and administrative expenses.
The board of trustees of Tellco pkPRO fixes the interest rate for the current year in December, basing its decision on the forecast for the annual result as well as the following principles: If the foundation’s coverage ratio is expected to be more than 97.5%, the retirement assets earn interest at the BVG minimum interest rate determined by the Federal Council. If the coverage ratio is between 90% and 97.5%, the board of trustees will decide to apply a lower interest rate or even a zero interest rate. If the coverage ratio is less than 90%, rehabilitation measures are implemented immediately.
Surpluses are used to raise reserves to cushion fluctuations on the markets and are also paid out to the insured during the surplus distribution process. According to the regulations of Tellco pkPRO, from a coverage ratio of 105% the foundation’s excess income is divided equally between the value fluctuation reserves of the affiliated pension funds (weighted) and the value fluctuation reserve of the foundation. From a coverage ratio of 115.7%, the net profit is credited in full to the uncommitted funds of the pension funds, who can use these funds as they choose for their insured.
Termination of contract
If an affiliation contract is terminated and the coverage ratio of the Foundation is less than 97.5 per cent, the termination benefits will be reduced by the amount of underfunding (imputation principle). The mandatory retirement assets, however, may not be reduced. The available value fluctuation reserve or uncommitted funds of the pension fund are used to reduce or eliminate the deficiency. If the coverage ratio is between 97.5% and 102.5%, the pension fund is entitled to the uncommitted funds. From a coverage ratio of more than 105%, the foundation’s value fluctuation reserve and uncommitted funds are added to the vested benefits on a pro rata basis.
An employee benefits scheme needs a long-term investment strategy that complies with the provisions of the Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV2). Due diligence obligations, security and diversification take centre stage. An important objective is to generate an appropriate and long-term return that is as stable as possible for the beneficiaries so that all pension and payment obligations can be met at all times.
It is the responsibility of the board of trustees to determine the investment strategy and bandwidths for the different asset classes. The investment strategy of pension fund pro is conservative. It is reviewed annually by the board of trustees and the investment committee with the help of an asset and liability model (ALM). For tactical decisions, the board of trustees dictates the bandwidths per asset class to the investment committee.
The investment strategy of Tellco pkPROtracks the BVG-25 Index 2000 of Bank Pictet & Cie, Geneva. It is just as conservative as the strategy of the index, which excludes both dramatic gains and excessive losses. The long-term objective is to exceed the BVG-25 Index 2000 with a comparable exposure to risk. Currently, Tellco pkPRO retains the freedom to deviate from the BVG-25 Index 2000 with its relatively strong focus on bonds and apply a balanced portfolio approach in order to sustainably increase its yields.