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GEMINI is charting the course for the future


Pension funds today are confronted with a number of major challenges



Increasing life expectancy 

Due to increasing life expectancy, pensions have to be disbursed for a longer period than expected.


Decreasing interest level

In order to secure adequate interest on the pension coverage capital, GEMINI has to achieve an annual return of about 3.5%.


Demographic development

The demographic development shows a sharp increase in the ratio of pensioners to active members (as baby boomers are retiring).



GEMINI’s set of measures

According to a study on sustainable pension financing commissioned by the GEMINI Foundation Board, which compares the required return on investment to the expected return on investment, GEMINI will face a funding gap of 1.5% per year. A group of specialists in the field has prepared a concept to close this funding gap. Instead of conventional measures, such as reducing the actuarial interest rate and the conversion rate, GEMINI proposes an elaborate, customised set of measures. This set of measures has the advantage that the financial effect of each individual measure is less pronounced.






Questions and answers


What is the conversion rate?

The amount of the pension is calculated by multiplying the savings capital with the conversion rate.

Example: Your savings capital amounts to CHF 300,000. Assuming retirement at age 65 and a conversion rate of 5.6%, your pension will amount to CHF 16,800 a year or CHF 1,400 a month.


How will the reducation of the conversion rate be implemented?

As of 2019, the conversion rate will be reduced in four steps:
2019:    5.9%
2020:    5.8%
2021:    5.7%
2022:    5.6%


The statutory conversion rate of 6.8% applies to the mandatory BVG insurance. Pension funds may
apply a different rate to non-mandatory insurance. GEMINI uses a ‘conversion rate envelope’ for both
the BVG mandatory insurance and the non-mandatory insurance. Under this approach, the entire savings
capital (both for the mandatory and the non-mandatory portion) is multiplied by the uniform conversion
rate, which may also be lower than 6.8%.

The following example shows that members always receive the higher of the two amounts.

Situation 1
Paul retires in 2022 at age 65. His savings capital            
amounts to CHF 350,000; the mandatory BVG portion               
amounts to CHF 250,000. 
Situation 2
Carl retires in 2022 at age 65. His savings capital
amounts to CHF 300,000; the mandatory BVG portion
amounts to CHF 250,000.

What is the actuarial interest rate?

The actuarial interest rate is the mathematical factor that should correspond to the investment return that can be expected with a high degree of certainty. In other words: It is the average interest rate on the remaining capital that must be generated to cover current pensions. If the actuarial interest rate is reduced, the capital underlying the current pensions must increase to ensure that pension payments can continue in the same amount.


What is the coverage ratio?

The coverage ratio corresponds to the relation of the effectively available assets to the actuarially required pension assets. A coverage ratio below 100% is referred to as underfunding, a coverage ratio of more than 100% is referred to as overfunding.