Pension Risk Study on the coverage ratio of SLI companies
The current Pension Risk Study on the coverage ratio of SLI (German: Swiss Leader Index) companies shows a trend: the decline in interest rates has noticeably increased the value of the pension obligations of the largest listed Swiss companies in 2016. This is shown in the Pension Risk Study by Willis Towers Watson.
The current Pension Risk Study shows a good balance sheet for SLI companies. Because the value of pension assets has increased thanks to good performance, the funding ratio according to international accounting standards remains constant. Changes in pension fund accounting and targeted de-risking of pension plans have also contributed to this.
The internationally oriented study by Willis Towers Watson analyzes the funding situation of the pension obligations in the balance sheets of all defined benefit pension plans of the leading listed companies in Switzerland in accordance with the international accounting standards IFRS and US-GAAP, both in and outside Switzerland.
"Willis Towers Watson chooses this approach to make Swiss-based companies more comparable according to international standards. Consequently, the funding ratio presented differs significantly from the regulatory funding ratio under Swiss GAAP," explains Stephan Wildner, Head of Retirement at Willis Towers Watson in Zurich.
Unchanged analgesic strategies
Compared to the previous year, the pension obligations of the SLI companies analysed increased by CHF 1.7 billion (+0.8%) and those of the SMI companies by CHF 1.2 billion (+0.6%). The plan assets exclusively allocated to the pension obligations were able to compensate for this increase in the same period with corresponding increases in value. As a result, the average funding ratio for the SMI companies and the SLI companies remained stable.
In 2016, as in the previous year, the pension obligations were therefore covered by the corresponding plan assets to the tune of ~83% (SMI) and ~80% (SLI). It should be emphasised that the investment strategy for these plan assets has remained comparatively unchanged in recent years despite the low interest rate environment: SLI companies have invested around ~33% in equities, ~40% in bonds, ~27% in real estate and alternative asset classes.
Switzerland compares favourably with other countries
Funding ratios in the international environment were stable in 2016, sometimes even increasing slightly. (US) companies included in the Willis Towers Watson Pension 100 Index have an unchanged funding ratio of 82% on average. For DAX companies, the funding ratio fell from 65% in 2015 to 63% in 2016, leaving SMI and SLI companies at an unchanged 80%, still at a comparable level to the US and well ahead of Germany.
