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Glossary

Termination benefits
Benefits provided to an insured person who departs from an occupational pension fund, as provided for in the regulations (also called a “vested benefit”). 
Share
A financial instrument which embodies a portion of the share capital of a company (public limited company). The share is a nominal value and a portion of the equity capital of a public limited company. Its return and market value (share price) are based on the economic earning power of the company concerned and can be subject to considerable price fluctuations. 
Retirement credits
Annual credit on the retirement account determined as a percentage of the coordinated salary. 
AHV/IV
The Old Age and Survivors’ Insurance (AHV) and the Disability Insurance (IV) are a part of the federal social securities, based on the so-called three-pillar principle. In conjunction with the supplementary benefits (EL), the AHV and IV form the first pillar, intended to cover basic subsistence requirements. All persons living and working in Switzerland are compulsorily insured. 
Assessment rate
Technical rate of interest for the determination of the pension capital of the pension recipients in the balance sheet. The balance sheet interest rate is to be defined such that it lies with an appropriate margin below a highly probable asset return over the mid-term. 
Operating statement (income statement)
Comparison of all the company’s expense and income items for the preceding business year. 
Cash payment
The termination benefit can be paid out in cash in the event of permanent emigration from Switzerland, beginning self-employment within Switzerland or the insignificance of the amount. Since 1 June 2007, policy holders can no longer request a cash payment in the context of the obligatory retirement assets if they remain compulsorily insured in accordance with the legal provisions of a member state of the EU or EFTA for the risks of age, death and disability. If the departing policy holder is married, the cash payment is only permitted if the spouse agrees to the cash payment in writing. 
Share index
Indicator for the monitoring of the performance of shares or individual groups of shares on the stock market (e.g. Swiss Market Index).
 
Benchmark
Reference size ‑ e.g. a share index or share price, or the return of a representative bond - with respect to the performance analysis of a portfolio. 
Retirement benefits
Benefits which mature on reaching the standard retirement age or if leaving paid employment from the age of 58. The BVG recognises the retirement pension and retired person’s children’s pension as retirement benefits. The regulations of the pension fund can provide for the benefits also to be made available in the form of capital instead of a pension. 
Autonomous fund
The Board of Trustees decides on the benefits, contributions and investment strategy of the pension fund. The company’s pension fund thus bears the risk of death and disability of its members itself. It must provide security for survivors and is responsible for the investment strategy in the context of the legal possibilities. 
Investment foundation
An investment foundation offers investment products similar to funds which are exclusively reserved for Swiss second and third pillar pension funds. These investment products are not subject to a tax on profits. The shares are emitted income-tax free and the dividends are paid without the deduction of withholding tax. 
Present value
The present value at a defined point of time corresponds to the value which must be available as interest-bearing capital such that the payment obligations to be expected later can be met. 
Investment return
The investment return includes both the profits (including interest, dividends) as well as the changes in value within a defined period, related to the invested capital. 
Employer
Galenica Ltd. and affiliated companies (closely affiliated economically and financially). 
Asset & liability analysis
Review of the risk tolerance of a pension fund. Factors such as the ratio of contributions to benefits, the special circumstances of the pension fund, the situation and outlooks of the financial markets, etc. are analysed. The result of this analysis influences the future investment strategy of the pension fund and the financial risks which it may take with its capital investments. 
Contribution plan
In the pure contribution plan, the contributions from the employer and employee are defined in the pension regulations dependent on the insured salary. The retirement benefits are calculated from the capital which the policy holder has saved at the point of retirement and are converted to a life-long pension using the conversion rate. The capital is increased throughout the duration of the insurance through savings contributions, any deposits and credited interest.  
Investment strategy
An investment strategy is understood as the long-term proportional distribution of the assets over the most important investment categories, such as bonds, shares, property and mortgages. The investment strategy is defined on the basis of the risk tolerance. 
Retirement assets
The sum of the collected retirement credits including vested termination benefits, purchases and interest. 
Investment funds
A combined asset with a common investment goal and a pre-defined investment strategy. Investors purchase so-called fund shares. The usually relatively high investment assets can enable a broad risk diversification. 
Expert
The pension fund expert is selected by the Board of Trustees and is responsible for preparation of the actuarial balance sheet and broad consultancy to the pension fund. The expert must be recognised by the cantonal regulatory authority and is not a member of the Board of Trustees. 
BVG
Swiss Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans, in force since 1 January 1985. The BVG is a part of the second pillar of the Swiss three-pillar social security concept. Together with the AHV/IV, the benefits are intended to allow the maintenance of the accustomed standard of living.  
Diversification
Diversification in the financial investment sector means the investment where possible in various financial assets (investment categories such as shares, bonds, property, alternative investments) to reduce risk. 
Coverage ratio
Relationship between the available assets and the present value of the insured benefits.
EU
European Union 
Vested benefits
See “Termination benefits” 
Disability benefits
Benefits rendered if the policy holder remains incapable of gainful employment after the expiry of the waiting period. The BVG recognises the disability pension and disability pension recipient’s children’s pension as disability benefits. 
Cash and cash equivalents
This term includes cash as well as account balances at financial institutions. 
Purchasing
An active policy holder may pay in additional contributions to their pension fund to achieve the maximum benefits according to the regulations. The amounts purchased are calculated by the relevant pension fund according to its regulations. 
Coverage capital
The coverage capital is the difference between the present value of the future benefits (monetary flows to be paid out) and the present value of the future contributions (monetary flows to be paid in). 
Third pillar
The Swiss old age, survivors’ and disability pension system. This system is embedded in the federal constitution and is based on three pillars. The AHV/IV forms the first pillar, a general, state insurance which provides a living wage. The occupational pension forms the second pillar. Together with the first pillar, this has the goal of guaranteeing the continuation of the accustomed standard of living. The third pillar is the personal pension, which each person sets up according to their own wishes and needs. 
Vested benefits account
Institution at the bank with the aim of investing and managing freely accruing pension capital tax-free and at favourable conditions. 
Balance sheet
Periodic comparison of all actives and liabilities at a defined cut-off date. The actives column of the balance sheet informs about the use of resources, while the liabilities column provides orientation regarding the acquisition of resources. 
IVG
Swiss Federal Disability Insurance Act 
Beneficiary
Insured member of the occupational pension fund. 
Coordination amount
The coordination amount corresponds to the difference between the basic salary and the insured annual salary. This amount recognises the fact that a proportion of the employee's earnings are already insured by the AHV. 
Vested benefits policy
A premium-free insurance with a vested benefit, set up as a one-off deposit at an insurance company. A redemption is only possible with a contribution to a personal pension fund or in legally authorised situations. 
Divorcees
If a policy holder is survived by a divorced partner, this partner is treated equally in certain situations as the surviving spouse. However, the benefits together with the benefits of the remaining insurances must not exceed the claim awarded in the divorce decree.
Financial resources
The financial resources of a pension fund are assets which it can dispose of over the short-, mid- and long-term. These assets are included in the actives column of the balance sheet. To know the actual financial position of the pension fund, the liabilities must also be taken into consideration in the balance sheet, among which the debts, obligations and free capital are itemised separately. 
EFTA
European Free Trade Association 
Disability pension recipient
Person who has become unable to work or earn for health reasons and thus draws a pension from the pension fund. 
Registered partnership
Registered partnerships of same-sex couples are treated equivalently to marriage. Thus the provisions of the regulations of the corresponding pension funds relating to marriage also apply to policy holders living in registered partnerships. 
Capital option
Declaration that the policy holder wants a monetary compensation or partial monetary compensation instead of the retirement pension. The application deadline is 3 months before the intended retirement. 
Survivors
Persons who at the death of the policy holder (active or retired) have a claim on a benefit of the pension fund. Usually includes widows, widowers, divorced partners, orphans. Depending on the regulations, other persons may be beneficiaries. 
Basic salary
Also known as the definitive wage. At our pension fund, this includes the monthly salary x 13 including the average contributions paid out over the last 3 years. 
Coordinated salary
Basic salary deducting the coordination amount. Basis for the calculation of the savings contributions. 
Pension fund regulations
The regulations describe the entire pension activities or a part thereof. The regulations define the group of beneficiaries, intended benefits, rights and obligations of beneficiaries and the financing of the benefits. 
Board of Trustees (PF)
The highest governing body of the pension fund. 
Audit report
The auditor or audit company prepares an “audit report” or “explanatory report”. This report comments on the items in the balance sheet and the operating statement and gives detailed information on the conclusions made in the course of the audit.
Benefit plan
In the benefit plan model, the retirement benefit is calculated in % of the insured salary. This means that the amount of the benefit is defined in advance and dependent on the last insured salary. It is not decisive how much retirement capital the policy holder has saved, rather the height of their last insured salary before retirement. 
UVG
Swiss Federal Accident Insurance Act 
Surviving spouses  
Spouse of a deceased policy holder (active or retired). This expression is used when widows and widowers can claim a survivor’s benefit under equal conditions. If the conditions according to the regulations are met, the surviving spouse draws the pension until death or remarriage. 
Shadow accounting
The law on occupational pensions (BVG) obliges all registered pension funds to manage individual retirement accounts according to BVG minimum standards. The pension fund uses this so-called shadow accounting to demonstrate compliance with the minimum requirements according to BVG. 
Parity body
Within the framework of the compulsory pension, a body composed of an equal number of employer and employee representatives. 
Overcompensation
When paying out disability and death benefits, the pension fund may take into account the benefits of other social securities and the remaining incomes. If these benefits exceed 90% of the putative lost earnings, the pension fund may reduce its benefits owing to overcompensation. 
Technical interest rate
Mathematical factor used for the discounting of future benefits (present value of the benefits). The technical interest rate is directly related to the conversion rate and influences the amount of the actuarially required pension capital. 
Savings contribution
Amount to be paid to finance the retirement credits. This increases the available retirement capital. 
Return
Yield of a capital investment expressed in percent of the invested capital. For shares and bonds, the result is derived from the relationship between the price gain over a defined period of time, plus dividends or nominal interest, to the stock market price.
 
WEFG
Swiss Ordinance on the Encouragement of Home Ownership using assets from the occupational pension.  
CO
Swiss Code of Obligations 
Insurance court
Each canton defines a cantonal body as a court which decides on disputes arising from an insurance relationship. Lucerne: Cantonal Insurance Court, Social Security Law Division, 6002 Lucerne. 
Daily allowance from the UVG
This is paid out following an accident. It usually amounts to 80% of the insured salary, at most however CHF 106,800, and is paid from the third day until consolidation with a disability pension. This daily allowance is paid out by the SUVA (Swiss Accident Insurance Fund) or from one of the licensed insurance companies. No daily allowance is paid if the policy holder is receiving an equivalent daily allowance from the IV. 
Conversion rate
Percent rate for the conversion of a capital into a life-long pension. The amount is dependent on the age at retirement. 
Minimum pension
Guaranteed minimum salary for a policy holder (example AHV/IV). 
Daily allowance from the IV
This is paid during integration activities and professional training, provided the policy holder cannot work. 
Auditors
The pension fund appoints an auditor to perform the annual management, accounting and asset audit. The auditor also monitors compliance with allocation in asset management. 
Performance
Result, return, asset development of a portfolio. 
Partial liquidation
A partial liquidation is made for a significant reduction of the staff, a restructuring of the company and the dissolution of the affiliation contract. The financial situation of the pension fund is also taken into consideration for the transfer of the credits. The pension fund defines the prerequisites and procedures for the partial liquidation in its regulations. The provisions in the regulations regarding the prerequisites and the procedures for the partial liquidation must be approved by the regulatory authority. 
Allocation method
In the allocation method, the annual contribution is periodically defined such that the accruing pension benefits can also be provided in the corresponding periods. Neither the ongoing nor future claims are thus secured by a corresponding coverage capital. 
Provisions 
Liability items formed as expenses of the operating statement in the balance sheet for the coverage of future obligations or expected losses. Provisions are often booked under other liabilities in the balance sheet. 
Residential property purchase incentive scheme
Possibility provided for within the framework of the BVG for the early withdrawal or pledging of pension benefits for the purchase of residential property. 
Security fund
This directs allowances to those pension funds which demonstrate an unfavourable retirement structure; it also ensures the legal benefits of pension funds which have become insolvent. 
Technical provisions
Provisions carried out as a result of the insecurities of the prognoses regarding the policy holder benefits (longevity, early retirement, adjustment of the conversion rate, adjustment of the pensions for inflation, etc.). 
PF
Pension fund 
Partial disability pension recipient
Persons who draw a partial disability pension because their inability to earn is reduced for health reasons. 
Coverage shortfalls
A coverage shortfall occurs if the assets of the pension fund are smaller than the financial obligations of the pension fund toward its policy holders, i.e. if the coverage rate is below 100 percent. In the event of a coverage shortfall, the pension funds are obliged to undertake remedial actions. 
Swiss GAAP FER 26
Standardised expert recommendation for the accounting of pension funds (in force since 1 January 2005). The operating statement is presented in single-column form, the investments must be accounted at market value and the annual financial statement is to be provided with further information as an appendix. 
PartG
Swiss Federal Act on Registered Same-Sex Partnerships 
Risk contribution
Amount to be raised for the financing of the survivors’ and disability benefits.  
Risk benefits
Benefits which are to be rendered in the event of the death (survivors’ benefits), or inability to earn (disability benefits) of a policy holder. These are financed by a risk contribution. 
Strategy
The (investment) strategy is understood as the distribution of assets in the portfolio according to investment categories (liquid resources, money market, bonds, shares, alternative investments, property), countries/sectors and currencies. From the perspective of the investor, the result of the strategy is an efficient investment mix which takes into account the investor’s investment goals and risk tolerance or risk appetite. 
Restriction/Provisio
If the pension fund regulations provide that a health restriction can be applied, then the disability and survivors’ benefits are restricted to the BVG minimum for 5 years. 
Bridging pension
Temporary pension provided between retirement and the drawing of the AHV pension. 
Occupational pension fund
Foundations are frequently found at companies which restrict their pensions to the company’s own staff. 
Fluctuation reserves
The fluctuation reserve permits the balancing of price fluctuations over the entire investment assets. The determination of the fluctuation reserve required is based on financial considerations and current situations (e.g. capital market development, asset allocation, investment strategy, structure and development of the pension capital and technical provisions, targeted returns and security level). 
Pensioner ratio
The pensioner ratio corresponds to the relationship between the number of active policy holders and the number of pension recipients (old age, survivors’ and disability pensions, without children’s pensions). The term is also used in the converse sense. 
ZGB
Swiss Civil Code 
AHVG
Swiss Federal Act on Old Age and Survivors' Insurance 
MVG
Swiss Federal Military Insurance Act. 
Regulatory authority
Regulation of pension funds in Switzerland is decentralised and performed by the cantons or regulatory regions of the cantons. The Federal Supervisory Commission for Occupational Benefits Insurance (OAK BV) is an independent authority commission superior to the regulatory authorities. Its main task is to ensure quality and legal security. The prerequisite for legal security is a uniform regulatory practice, i.e. consistent use of the regulations issued by the Federation. The OAK BV issues instructions and conducts inspections for this purpose. 
Each canton defines the competent authorities for the supervision of the pension funds registered in the area of the canton. On the basis of the structural reform of the second pillar and to strengthen its independence, this authority will now be structured as a public institution with its own legal identity. 
FZG
Swiss Federal Act on Vesting in Occupational Retirement, Survivors' and Disability Pension Plans