Benefits after termination of employment 

The Group maintains a number of pension plans in the Principality of Liechtenstein and abroad for employees meeting the criteria for admission to the pension plans. Amongst these are both defined-benefit and defined-contribution plans which insure most employees against the effects of death, invalidity and retirement. In addition, there are schemes for service anniversaries which qualify as other long-term employee benefits.

Defined-contribution pension plans 

The Group offers defined-contribution pension plans to those employees who meet the appropriate admission criteria. The company is obligated to transfer a predetermined percentage of the annual salary to the pension plans. For certain plans, the employees are also obligated to make contri­butions. These contributions are deducted by the employer from the salary typically each month and also passed on to the pension plans. Apart from the payment of contributions and the transfer of employee contributions, there are presently no further obligations incumbent on the employer. 

The employee contributions to contribution-defined pension plans for 2016 amounted to CHF 1.393 million (prior year: CHF 1.208 million). 

Defined-benefit pension plans

The Group finances defined-benefit pension plans for employees who meet the admission criteria. The most significant of such plans are located in the Principality of Liechtenstein and Switzerland. Following the takeover of Centrum Bank a further pension plan was added. Since then, the employees involved have been transferred into existing plans.

For employees in the Principality of Liechtenstein and Switzerland, the Group operates several pension plans with fixed, predefined admission criteria. The largest of the plans are operated using an autonomous foundation, the remaining plans are handled using collective foundations of insurance companies. In these foundations, the assets available to meet the pension obligations are segregated out. 

For the pension plans which are operated using collective foundations, there are pension commissions which comprise an equal number of represen­tatives. 

The Council of the Foundation of the autonomous pension plan is also made up of an equal number of employer and employee representatives. On the basis of the Law and the Rules of the Pension Fund, the Foundation Council is obligated to act solely in the interests of the Foundation and of the bene­ficiaries (current actively insured employees and pensioners). Thus, in this plan, the employer cannot himself determine pension benefits and their financing, but resolutions are taken on an equal representation basis. The Council of the Foundation is responsible for setting the investment strategy, for changes to the Rules of the Pension Fund and in particular also for determining how pension benefits are to be financed. 

Retirement benefits in this plan are based upon the balance of accumulated capital savings. Annual savings credits and interest (no negative interest is possible) are added to the employee‘s capital savings account. Upon retirement, the insured person has the option between a lifetime pension which includes a reversionary spouse‘s pension, or the payment of a capital sum. In addition to retirement benefits, employee benefits also include an invali­- dity pension and a partner pension. These are computed as a percentage of the insured annual salary. An insured person can also purchase additional benefits to improve his/her pension situation up to a maximum allowed under the pension rules. 

Upon termination of employment, the accumulated savings capital is transferred to the pension plan of the new employer or to a vested benefits scheme. This form of employment benefit can lead to a situation where pension payments may vary significantly between the various years. 

The minimum provisions of the Law on Occupational Pension Plans and its Implementing Provisions (BPVG) are to be observed in determining employee benefits. The minimum insurable salary and the minimum savings credits are laid down in the BPVG.

As a result of the form of the pension plan and the legal provisions of the BPVG, the employer is exposed to actuarial risks, the most significant of which are investment risk, interest-rate risk, invalidity risk and longevity risk. The employee and employer contributions are laid down by the Councils of the Foundations. In this connection, the employer must bear, at a minimum, half of all contributions. In the event of a funding deficit, restructuring contri­butions to eliminate the funding deficit may be demanded both from the employer and employees. 

The latest actuarial valuation of the present value of the defined-benefit obligations and service costs was carried out as of 31 December 2016 by independent actuaries using the Projected Unit Credit Method. The fair value of plan assets as of 31 December 2016 was determined based upon information available at the time of preparation of the annual financial statements. 

The most significant assumptions underlying the actuarial computations may be summarised as follows:

The amounts recognised in the income statement may be summarised as follows:

The movement in pension obligations and plan assets may be summarised as follows:

The net position of pension obligations recognised in the balance sheet may be summarised as follows:

In the case of the autonomous pension plan, the Foundation Council issues investment guidelines for the investment of the plan’s assets which contain the tactical asset allocation and the benchmarks for comparing the results with those of the general investment universe. The plan assets are well diver­- sified and, in addition, the legal provisions of the BPVG are to be observed. The plan assets of collective pension foundations are invested in insurance policies with insurance companies. The Council of the Foundation reviews on an ongoing basis whether the investment strategy chosen is appropriate to cover the pension benefits and whether the risk budget corresponds to the demographic structure. Compliance with investment guidelines and the investment performance of investment advisors are also subject to ongoing review.

Plan assets primarily consist of the following categories of securities:

The pension plans hold shares in VP Bank Ltd, Vaduz, with a market value totalling CHF 1.6 million (previous year: CHF 1.2 million). In 2016, the return on plan assets was CHF 1.428 million (previous year: –CHF 5.742 million).

The defined-benefit pension obligations may be allocated as follows to the currently active insured employees, those who have left the Group with vested rights and pensioners as well as the duration of the pension obligations:

The duration of pension obligations is approximately 18 years (previous year: 18 years).

Presented in the following table are the sensitivities for the most important factors in the computation of the present value of pension obligations.

Other employee benefits payable in the long term exist in the form of long service awards. Analogously to the defined benefit pension plans, actuarial calculations have been performed and an accrued expense recognized for these benefits. In 2015, the Group introduced a uniform regulation for the calculation of benefits from long service awards for most Group employees. For some employees abroad, separate regulations apply. These regulations qualify as plans for other employee benefits payable in the long term.