Defined benefit plans
Swisscom maintains several pension plans for employees in Switzerland and Italy. Expenses of defined benefit plans totalled CHF 295 million in 2013 (prior year: CHF 80 million). Of this amount, CHF 258 million (prior year: CHF 50 million) was recorded as personnel expense and CHF 37 million (prior year: CHF 30 million) as finance expense.
The majority of Swisscom’s employees are insured for the risks of old age, death and disability by the independent pension plan, comPlan. The benefits of comPlan exceed the minimum laid down in the Federal Law on Occupational Retirement, Survivors’ and Disability Insurance (“BVG”). The ordinary employer contributions encompass risk contributions of 3.35% and contributions varying with age of 5-13% of the insured salary to be credited to the individual retirement savings’ accounts. The standard retirement age is 65. Employees qualify for early retirement at the earliest on their 58th birthday, whereby the rate of conversion is reduced in line with the longer expected duration of pension payments. Furthermore, employees may choose to take their entire pension or part thereof in the form of a capital payment. The amount of the pension paid results from the conversion rate which is applied to the accumulated savings of the individuals concerned in the case of retirement. For individuals retiring at the age of 65, the rate of conversion is 6.4% up to the end of 2013. From 2014 onwards, the conversion rate was reduced to 6.11%. The accumulated savings result from employee and employer contributions which are paid into the individual savings account of each individual insured person as well as the interest accruing on the accumulated savings. The interest rate to be applied to the accumulated pension savings is laid down annually by the Foundation Council of comPlan. The legal form of comPlan is that of a foundation. The Foundation Council, which is constituted by a equal number of representatives of the employer and employees, is responsible for the management of the Foundation. The duties of the Foundation Council are laid down in the BVG and the Pension Fund Rules. In accordance with BVG, a temporary funding deficit is permitted. The Foundation Council must take appropriate measures in order to rectify the funding deficit within a reasonable time. Pursuant to BVG, additional employer and employee contributions may be incurred whenever a significant funding deficit in accordance with BVG arises. In such cases, the risk is split between the employer and employees and the employer is not legally obligated to assume more than 50% of the additional contributions. As of 31 December 2013, the funding ratio as defined by BVG of comPlan was approx. 106% (prior year: 103.4%). The Investment Commission is the central management, coordination and monitoring body for the management of the pension plan assets. The pension plan assets are administered using mandated, independent financial service providers. Monitoring is assumed by an external investment controller. The Foundation Council determines the investment strategy within the framework of the legal provisions. Within its terms of reference, the Investment Commission may undertake the asset allocation.
In 2012, the Foundation Council resolved to make various amendments to the pension plan which are designed to ensure long-term financial stability considering the low interest rates and growing life expectancy. The amendments will take effect in 2014 and encompass measures affecting pension benefits. In particular, the rate of conversion and thus the level of future retirement benefits for new pensioners was lowered. The amendments to the pension plan led to a reduction in defined benefit obligations of CHF 157 million which was taken to income in the fourth quarter of 2012.
Other pension plans
In addition to various smaller pension plans in Switzerland, other plans include the pension plan for Fastweb employees. Employees of the Italian subsidiary Fastweb have acquired a title in future pension benefits up to the end of 2006. These benefits are recorded in the balance sheet as defined benefit obligations.