RESTRICTED  
  
WT/BFA/W/577  
 
1 March  2022 
(22-1908) Page: 1/89 
Committee on Budget, Finance and Administration  Original: English  
 
   
   
WTO PENSION PLAN 2020 FULL ACTUARIAL VALUATION  
NOTE BY THE CHAIRMAN OF THE WTOPP MANAGEMENT BOARD  
The WTO Pension Plan undergoes a full actuarial valuation every three years. The attached full 
actuarial valuation is based on 2020 data and is the latest actuarial report to be issued by the WTOPP. 
The last full actuarial valuation was completed in 2017 w ith 2016 data.  
 
Due to the transition to a new consulting actuary, following a competitive procurement exercise, this 
report is being issued with a delay of just over a year when compared to the normal cycle of reporting.  
 
The 2020 valuation report identi fies an important actuarial deficit. Stakeholders will want to better 
understand the circumstances leading to the projected deficit and are encouraged to read the report 
carefully.  
 
Following the identification of an actuarial deficit, the WTOPP Management  Board will be responsible 
for recommending corrective actions to the General Council (through the Committee on Budget, 
Finance and Administration) to restore an actuarial balance.  
 
The Management Board looks forward to engaging with all stakeholders when  presenting this report 
and subsequently when elaborating corrective actions.  
 
 
Jean-Marc Van Dril, Chair of the Management Board  
 
 
_______________  
 
 
 
 WT/BFA/W/577  
 
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II / I 
 
 
 
 
 
 
 
 
Full Actuarial Valuation Report  
as at 31. December 2020  
World Trade Organization  – WTO P ension Plan  
 
 
 
 
 
 
 
 
 
 
 
Contact :   Dr. David Schiess , M.Sc., Senior actuary  c-alm AG  
   Email: david .schiess @c-alm.ch; Tel.: +41 ( 0)71 227 35 35  
 
Date :    February 11, 2022  WT/BFA/W/57 7 
 
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 Contents  
 
1 Executive Summary  ................................ ................................ ................................ .....................  4 
2 Changes from Valuation at YE2016 to Valuation at YE2019  ................................ ....................  9 
3 Valuation  at YE2020  ................................ ................................ ................................ ..................  10 
3.1 Data  ................................ ................................ ................................ ................................ ................................ ...... 10 
3.1.1 Liability Side  ................................ ................................ ................................ ................................ ......................  10 
3.1.2 Asset  Side ................................ ................................ ................................ ................................ ...........................  13 
3.1.2.1  Reconciliation of Market Values  ................................ ................................ ................................ ........ 13 
3.1.2.2  Smoothing Method  ................................ ................................ ................................ ................................  13 
3.2 Assumptions  ................................ ................................ ................................ ................................ .....................  14 
3.2.1 Summary  ................................ ................................ ................................ ................................ ............................  14 
3.2.2 Description  ................................ ................................ ................................ ................................ ........................  15 
3.3 Methods  ................................ ................................ ................................ ................................ .............................  24 
3.3.1 Summary  ................................ ................................ ................................ ................................ ............................  24 
3.3.2 Description  ................................ ................................ ................................ ................................ ........................  24 
3.3.2.1  Projection Software  ................................ ................................ ................................ ................................  25 
3.3.2.2  Open -Group Valuation ................................ ................................ ................................ ..........................  26 
3.3.2.3  Closed -Group Valution  ................................ ................................ ................................ .........................  29 
3.4 Results  ................................ ................................ ................................ ................................ ................................ . 32 
3.4.1 Open -Group  Valuation  ................................ ................................ ................................ ................................ . 32 
3.4.1.1  Required Contribution Rate  ................................ ................................ ................................ ................  32 
3.4.1.2  Cash -Flow Analysis  ................................ ................................ ................................ ................................ . 39 
3.4.2 Closed -Group Valuation  ................................ ................................ ................................ ..............................  43 
A1. Cash -Flow Projections  ................................ ................................ ................................ ...............  45 
A2. Glossary  ................................ ................................ ................................ ................................ ...... 47 
A3. Disclaimer  ................................ ................................ ................................ ................................ ... 50 
A4. Draft Full Actuarial Valuation Report at YE2019  ................................ ................................ .... 51 WT/BFA/W/57 7 
 
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 1 Executive Summary  
1) This report sets out the results of the full actuarial valuation completed as at 31 . 
December 2020  for the World Trade Organization Pension Plan (WTOPP ).  Present report: 
Valuation d ate 
2) The last full actuarial valuation report as at 31 December 2016 has been 
performed and adopted in 2017.  The following full actuarial valuation was 
prepared as at 31 December 2019, but the draft report was not issued by the 
Management Board, due to unforeseen circumstances in the provision of 
actuarial consultancy services explained below. Nevertheless,  this draft report 
serves as the main comparison and reference, respectively for the present 
report as it contains the most recent information and its projection results are 
valid. The draft 2019 full valuation is found in Appendix A4 of this report. The 
present report also presents in Chapter 2 the “bridge” between the actuarial  
valuation report as at 31 December 2016 and the draft actuarial valuation report 
as at 31 December 2019.  Last report s 
3) Towards the end of 2020  WTO decided to terminate its collaboration with 
Mercer and selected c -alm AG (with David Schiess as the lead actuary) as the 
new consulting actuary  in spring of 2021. Hence, it is important to note that the 
above -mentioned draft report as at 31 December 2019  was produced  by 
Mercer  whereas the present report  as of 31. December 2020  was prepared by 
c-alm.  Change of the 
consulting actuary  
4) Of course , a change in the consulting actuary leads to a c hange in the used  
projection model . For the sake of continuity and to ensure /improve  model 
quality a replication exercise with  the year-end 2019  data has been carried out  
by c-alm.  Model replication  
5) The upshot of this replication exercise is that the deviations between Mercer 
and c -alm are  fairly small . This holds for both the open -group and the closed -
group valuation.  
The details regarding these replication results can be found in chapter 3.4.1 .  Replication results  
6) The Plan's latest full actuarial valuation at year -end 2016 identified a required 
contribution rate of 24.4% to ensure the long -term viability of the Plan. Since 
the act ual contribution rate is 23.7%, this implies an actuarial gap of 0.7% at 
year-end 2016.  Actuarial gap at 
year-end 2016  
7) The actuarial valuation at year -end 2019 presented in appendix A4 was made 
based on a set of significantly revised assumptions and obtained a required Actuarial gap at 
year-end 2019  WT/BFA/W/57 7 
 
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1 The changed assumptions are: p robability  to leave a surviving spouse upon death, age difference between spouses 
upon death, choice between withdrawal settlement and deferred retirement benefit upon exiting the fund, mortality 
rates, disability rates, asset value and discount rate. All these assu mption changes are thoroughly discussed in 
chapter 3.4.1. contribution rate of 29.5% (before a technical correction regarding 
discounting). This valuation, performed  by Mercer, was validated by a 
replication exercise carried out by c -alm which identified practically the same 
required contribution rate (the difference of 0.3% between both actuaries can 
be considered immaterial). Hence, the actuarial gap at year -end 201 9 amounts 
to 5.8% without the discounting correction and to 6.6% with the discounting 
correction.  
8) Following the 2019 replication exercise, c -alm recommended further 
adjustments to the model assumptions, which the Management Board decided 
to adopt for the next valuation at year -end 2020.1 As a result, the actuarial 
valuation  at year -end 2020 , the details of which are presented in full detail in 
chapter 3, measured the Plan's required contribution rate at 34.2% . This  
corresponds to a n actuarial gap of 10.5% .  Actuarial gap at 
year-end 2020  
9) The following plot shows the development of the actuarial gap from year -end 
2016 till year -end 2020 .  Actuarial gap: 
YE2016 -> YE 2020  
Plot 1: Development of the actuarial gap: YE2016 -> YE2020   
 
  
Source: Draft full actuarial valuation report of Mercer at year -end 2019  (used for the time period from year -
end 2016 till year -end 2019) and QUANTUS projection tool c -alm (used for the time period from year -end 
2019 till year -end 2020)   
10) As the above plot shows, the actuarial gap increased from 0.7% at year -end 
2016 to 6.6% a t year -end 2019  (with discounting correction)  mainly due to 
assumption revisions.   Discussion  
WT/BFA/W/57 7 
 
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 Afterwards, t he actuarial gap further increased to 10.5% at year -end 2020. 
Again, this increase has mainly been driven by another  change in assumptions.  
11) Lastly, i t is important to note that the majority of this large  actuarial gap  at year -
end 2020  has already been detected by the previous consulting actuary at year -
end 2019.  With the discounting correction 63% of the actuarial gap of 10.5% at 
year-end 2020 has alre ady been detected at year -end 2019.  
12) The funding principle of WTOPP  is that the existing assets together with the 
future contributions and the future investment incomes need to finance all the 
future benefits  and administrative costs .  Funding principle  
13) As discussed above the long -term cost (required contribution rate) of the 
pension plan has increased primarily  due to the revision of the actuarial 
assumptions  to 34.2%  at year -end 2020.  Hence, the gap between the required 
contribution rate  and the actual contribution rate of 23.7% has further increased  
and amounts to 10.5% at year -end 2020 .  Open -group:  
Results  
14) In the closed -group valuation the underfunding  has decreased  from 981 MCHF  
as of year -end 2019  to 892 MCHF as of year -end 2020 , but it is still considerable . 
Correspondingly, the funding ratio has  sligh tly increased  from 39% as of year -
end 2019  to 42.7% as of year -end 2020 .  
The main driver of this effect is the higher real interest rate  which re sults from 
a change in method (see chapter 3.4.2 ). Closed -group:  
Results  
15) A legitimate  question is whether the open -group valuation or the closed -group 
valuation is the (most) relevant one  for WTOPP . Principally, the answer to this 
question depends on the probability of a dissolution of the WTO. If there is (no) 
a dissolution then the (open -group) closed -group valuation is decisive. 
However, as it is clear to the relevant stakeholders that the Members – and not 
the WTOPP – would need to finance the underfunding in the case of a 
dissolution (liquidation perspective) of the WTO, the pension fu nd can focus on 
the open -group valuation (ongoing perspective). Given the long -term nature 
of the fund and for the sake of continuity and attractive  benefits this makes 
perfectly sense. Hence, the relevant perspective fo r steering  the fund into the 
future was and still is the open -group valuation (ongoing perspective).  Open vs. closed :  
relevant  
perspective?  
16) Thus, we base our recommendations solely on the open -group valuation (and 
not on the closed -group valuation). As the gap between the required 
contri bution rate of 34.2%  as of year -end 2020  to the actual contribution rate 
of 23.7% is very large  (10.5%) , we strongly recommend that the WTOPP  
Management Board considers how to bring the required contribution rate of 
the plan into balance  with the actual contribution rate paid to the plan.  Recommendations  
/ actions  WT/BFA/W/57 7 
 
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 17) This should be done taking into account the long-term nature  of the pension 
fund and the  corresponding  sake of continuity  in contributions and benefits.  Sake of continuity  
18) However, it has to be noted that from one valuation to the next, the actuarially 
calculated required contribution rate may vary due to changes in asset values 
and the insured population, changes in the benefit provisions, changes in 
demographic and financial assumptions, etc.  But: volatility  
19) Principally, the necessary reform  can be carried out by decreasing certain 
benefits and/or by increasing the actual contribution rate. However, there are 
many details regarding the necessary reform that need to be analysed and 
discussed. For instance , there are several different benefit t ypes that can be 
reduced, benefits can be reduced for certain groups of participants and 
beneficiaries only and lastly, any actions on the benefits and/or the 
contributions can be carried out step -wise over time. We will gladly assist the 
WTOPP in any work  regarding this necessary reform.  Reform variants  
20) Since there are considerable assets to invest , one of the main risks is clearly the 
investment risk. The required contribution rate presented in this report is only 
sufficient if the pension fund achieves net portfolio returns in the future which 
cover the assumed discount rate on average. Thus, the i nvestment performance 
needs to be monitored closely and the investment strategy needs to be 
adjusted if necessary.  
As shown in chapter 3.4.1.1  a reduction of the dis count rate by 1.0% (at all times) 
ceteris paribus leads to an increase in the required contribution rate of 8.2%. 
This shows that the investment risk is very important.  Investment risk  
21) Another potentially import ant risk is the r eal promise  of the fund to provide full 
cost-of-living adjustments  to its pensions . It is clearly difficult to finance real 
pensions (full pension increases according to inflation) with nominal means .  
Inflation risk has been unusually low in the past and central banks were able to 
carry out their quantitative easing. But this can look very different in the future 
as the major central banks have already started to tighten their monetary policy 
in order to fight the increasing inflation  rates .  
As shown in chapter 3.4.1.1  an increase in the inflation rate and for the sake of 
consistency also in the pension increase rate, the general salary increase rate as 
well as t he discount rate by 1.0% leads to a virtually unchanged required 
contribution rate. However, if the increase in the general salary increase rate 
(contributions!) and/or the discount rate (investment income!) is smaller than 
the increase in the pension incr ease rate, then the actuarial position of the fund 
(clearly) worsens.  Pension  
increase risk  WT/BFA/W/57 7 
 
- 8 - 
 
 
  
 22) We are available to answer any questions on the material contained in this 
report and to provide explanations or further details, as may be appropriate.  Availability  
23) Readers interested in the disclaimer to the present report are referred to 
appendix  A3. Disclaimer  
24) Lastly, the glossary given in Appendix A2 contains an explanation of the most 
important (technical) terms used in the present report.  Glossary  
  
Respectfully submitted,   
St. Gallen,  February 11, 2022   
  
 
  
Dr. David Schiess , M.Sc.  
Lead actuary  
Senior Actuary  
Fully qualified a ctuary SAA 
Federally certified pension fund actuary (SCPFA)  Livio Forlin  
Actuary  
Consultant  
Actuary   
WT/BFA/W/57 7 
 
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   2 Changes from Valuation at YE2016 to Valuation at YE2019  
25) This chapter presents the changes from the last adopted full actuarial valuation 
at year -end 2016 to the (not adopted) full actuarial valuation at year -end 2019.  Overview  
26) The (not adopted) full actuarial valuation report at year -end 2019 can be found 
in Appendix  A4.  Report at YE2019:  
annex!  
27) As the actual contribution rate amounts t o 23.7% and the required contribution 
rate at year -end 2019  amounts to 29.5%, there is already a significant actuarial 
gap of 5.8% at year -end 2019  (see Appendix A4 for full detail of the 2019 
valuation).  YE2019: big gap  
28) Hence, it is interesting to see how the required contribution rate developed 
from year -end 2016 (last adopted full actuarial valuation report) till year -end 
2019 (last but not adopted full actuarial valuation report). The following plot 
displays this development.  RCR:   
YE2016 -> YE2019  
Plot 2:  Reconciliation of the required contribution rate: YE2016 -> YE2019   
 
  
Source: Draft full actuarial valuation report of Mercer at year -end 2019 (see appendix A4)  
  
29) As the above plot shows, the required contribution rate has changed from 
24.4% at year -end 2016 to 29.5% at year -end 2019. The major drivers of this 
development have been the changing of the financial and the active 
participants assumptions, which are expl ained in detail in appendix A4. Discussion  
WT/BFA/W/57 7 
 
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  3 Valuation  at YE2020  
3.1 Data  
30) All data was provided directly by WTOPP staff.  Data p rovider  
31) Unless stated otherwise all figures are in CHF.  Currency  
3.1.1 Liability Side  
32) In this chapter we present tables and plots to get a grasp on the characteristics 
of the insured population ( plan participants and beneficiaries).  Insured  
population  
33) A summary of  the insured population data used for the present full valuation 
at 31. December 2020  and the previous full valuation at 31 December 2019  is 
set out below.  Headcount  
Table  1: Insured population: Headcount   
 
  
Source previous year: Mercer Full Report YE 2019   
34) The following table  summarises the most important statistics  of the insured 
population  including the comparison to the previous year . Statistics  
31.12.2019
Male Female Total absolut in %
Participants 321                388               709               714                -5                 -0.7%
Beneficiaries 184                200               384               370               14                 3.8%
Retirement 156               162               318               305               13                 4.3%
Disability 11                 11                 22                 22                 -                0.0%
Spouses 6                   20                 26                 24                 2                   8.3%
Children 11                 7                   18                 19                 -1                 -5.3%
Total 505               588               1’093             1’084             9                   0.8%
Share of beneficiaries 36.4% 34.0% 35.1% 34.1%Change
Headcount31.12.2020WT/BFA/W/57 7 
 
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2 Note that all information  given in this table is «stock» -information at the mentioned due  dates. Hence, there are 
naturally (moderate) differences to the «flow» -information given in the income and expenditure statement 
(WTOPP’s financial statement). For instance, the benefits presented in the income and expenditure statement are 
the benefits a ctually paid in a certain year. In contrast to this, the benefits given in this table are the benefits of all 
beneficiaries at the mentioned due dates. In this table we deliberately present «stock» -information only, as the 
insured population at year -end 2020  serves as the basis for all actuarial projections.  Table  2: Insured population: Statistics2  
  
Source previous year: Mercer Full Report YE 2019 ; FAR: final average remuneration; YoS: years of service   
35) The two tables above show that the  population of plan participants has 
changed  only slightly. However, the population of beneficiaries has increased 
by 3.8%. This explains the fact that the share of beneficiaries has increased as 
well. This is only natural as the pensioner population is still quite small and 
young at the moment and thus,  it will gain in significance in the future.  Discussion  
36) Finally, the following diagram displays the age structure of the insured 
population.  Ages s tructure  
31.12.2019
Male Female Total absolut in %
Participants
∑ FAR 59’861’981    61’741’962    121’603’943  121’359’176  244’767         0.2%
Ø FAR 186’486         159’129         171’515         169’971         1’544             0.9%
∑ Pensionable Renumeration 61’001’712    62’971’152    123’972’864  123’716’938  255’926         0.2%
Ø Pensionable Renumeration 190’036         162’297         174’856         173’237         1’619             0.9%
Ø YoS 13.2              13.1              13.1              12.6              0.5                4.2%
Ø Age 47.2              45.7              46.4              46.3              0.1                0.2%
Beneficiaries
∑ Benefits 13’681’657     12’799’866    26’481’523    25’447’548    1’033’975      4.1%
Retirement 12’567’374    11’050’793    23’618’167    22’719’823    898’344         4.0%
Disability 714’516         775’405         1’489’921      1’479’589      10’332           0.7%
Spouses 350’304         927’393         1’277’697      1’148’808      128’889         11.2%
Children 49’463           46’275           95’738           99’328           -3’590           -3.6%
Ø Benefits
Retirement 80’560           68’215           74’271           74’491           -220              -0.3%
Disability 64’956           70’491           67’724           67’254           470               0.7%
Spouses 58’384           46’370           49’142           47’867           1’275             2.7%
Children 4’497             6’611             5’319             5’228             91                 1.7%
Ø Age
Retirement 69.6              68.2              68.9              68.8              0.1                0.1%
Disability 62.5              55.6              59.1              58.5              0.6                1.0%
Spouses 58.8              69.3              66.8              68.0              -1.2               -1.7%Amounts in CHF31.12.2020 ChangeWT/BFA/W/57 7 
 
- 12 - 
 
 
   Plot 3: Insured population:  age structure   
 
  
  
37) The above plot shows that the ages around 45 till 55 years are the most 
dominant ones what regards the population of plan participants. The 
population of pensioners is clearly small and young (all beneficiaries are below 
life expectancy) at the moment. Thi s will change in the future as the pension 
fund matures in age structure.  Discussion  
WT/BFA/W/57 7 
 
- 13 - 
 
 
  
 
3 See chapter  3.2 for further explanation  on this .  3.1.2 Asset  Side 
3.1.2.1  Reconciliation  of Market Values  
38) The waterfall chart  below provides a reconciliation of the market value  of assets  
(all amounts are shown in MCHF)  from year -end 2019  till year -end 2020 .  Reconciliation  
Plot 4: Reconciliation of market value of assets : YE2019   -> YE2020   
 
  
  
39) The following table displays some information on the investment return in the 
reporting year 2020 .  Investment return  
Table  3: Investment  Return in 2020   
 
  
Source: Inflation rate according to  Swiss National Bank (SNB)   
40) As stated in  Plot 4 the nominal investment income in the year 2020  amounts to 
27.7 MCHF. This corresponds to a nominal invest ment return of 4.2% With the 
inflation of -0.8%  (deflation)  this implies a real investment return in the year 
2020  of 5.0%  Discussion  
3.1.2.2  Smoothing  Method   
41) The Management Board has decided  in October 2021  to abolish the  previously 
used  asset smoothing  method. Instead, the market value of the assets will be 
used .3  abolished  
Nominal Return Inflation Rate Real Return
Year A B C=A-B
2020 4.2% -0.8% 5.0%WT/BFA/W/57 7 
 
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   3.2 Assumptions  
3.2.1 Summary   
42) c-alm put forth a list of seven assumptions that should be updated and carried 
out the necessary data analysis in order to provide specific assumption 
proposals. The actuarial working group ( AWG ) discussed all of these 
assumptions in detail and decided to adopt  all of the corresponding proposals. 
Finally, the Management Board  (MB)  endorsed all proposed changes 
subsequently to its  meeting of 4 October 2021. The endorsed actuarial 
assumption revisions are the following:  
1. Probability to leave a surviving spouse upon  death  [disclosure]  
2. Age difference between spouses upon death [ model amendment]  
3. Choice between withdrawal settlement and deferred retirement benefit  
upon exiting the fund  [model amendment ] 
4. Mortality rates  [technical update]  
5. Disability rates  [technical update]  
6. Asset value  [approach amendment]  
7. Discount rate  [approach amendment]  Changed  
assumptions  
43) The following table provides a summary of the assumptions used in the open -
group valuation. Unless stated otherwise in chapter 3.3.2.3 , these assumptions 
are also used in the closed -group valuation where applicable.   Assumption  
overview  
Table 4: Summary of assumptions   
  
The changed assumptions are highlighted in red font.    
BVG 2015 improved
75% of BVG 2015Smoothed
0.2%31.12.2020
3.8% for the first 10 years, 4.5% thereafter
1.0% until 2029, and 1.5% thereafter
1.0%
1.0%
BVG 2020 cohort table
70% of BVG 2020Market
0.2%31.12.2019
3.7% for the first 10 years, 4.5% thereafter
1.0% until 2029, and 1.5% thereafter
1.0%
1.0%Financial
Discount Rate
General Salary Increase
Pension Increase
Inflation Rate
DemographicAsset Value
WTO Specific (rates in Section 3)
Active Head Count100% deferred
Age Difference WTO Specific (rates in Section 3) Male: -3 years; Female: +3 yearsWTO Specific (rates in Section 3)
WTO Specific (rates in Section 3)
50%
25%
700 700Early Retirement
Individual Salary Increase
WTO Specific (rates in Section 3)
Lump Sum Share
New entrants WTO Specific (rates in Section 3) WTO Specific (rates in Section 3)MortalityAdministrative Costs
Male: 80%; Female: 60% WTO Specific (rates in Section 3)Withdrawal vs. DeferredWTO Specific (rates in Section 3)
WTO Specific (rates in Section 3)
WTO Specific (rates in Section 3)
50%
25%
Proportion Married on DeathDisability
Termination
Lump Sum ProbabilityWT/BFA/W/57 7 
 
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 3.2.2  Description  
44) In this chapter we provide some information on all the actuarial assumptions 
shown in Table 4. Naturally, there are more  detailed  explanations for the 
changed assumptions  that are not contained in the present report .  Information  
45) Until year -end 2019 , a smoothed asset value was used in the computation of 
the required contribution rate. However, a smoothing method involves 
arbitrary choices  (what years are to be considered and what kind of weights 
are to be used?)  and more importantly, such a smoothed asset value simply 
does not exist. Thus, it was decided to abolish this smoothing method and to 
use the market value of asset s instead (the only existing value). It is important 
to note that this also leads to a greater stability  in the required contribution 
rate (a desirable feature given the long -term perspective of WTOPP) because 
the discount rate over the next 10 years consi ders the same market 
information. The latter also ensures consistency in the two assumptions: the 
asset value and the discount rate  are determined by exploiting market values . 
A price rally in the equities f.e. leads to a higher asset value but on the othe r 
hand also to a lower discount rate over the next 10 years due to lower 
expected returns  (assuming unchanged earnings) . Thus, there are (often) 
opposing effects which leads to the greater stability  in the required 
contribution rate as mentioned above. However, if the financial world has 
systematically changed, then this is reflected with the new approach. Clearly, 
this is a desirable feature. This is not the case in the above example of a price 
rally but it would be the case if the companies’ earnings chan ge. Hence, this 
assumption change can be viewed as an approach amendment.   
We support the approach amendment  put forward by the AWG and endorsed 
by the Management Board .  Asset value  
 
[approach  
amendment]  
46) As mentioned above, the discount rate over the next 10 years should reflect 
the current market situation to ensure consistency to the used asset value  
(fundamental -economic approach) . However, for the sake of continuity the 
discount rate after 10 years is determined by a rather constant risk premium 
approach. This is the only reasonable approach as the current market 
situation cannot be expected to hold forever. Hence, this assumption change 
can be viewed as an approach amendment tightly connected to the on e on 
the asset value discussed above.  Lastly, both the discount rate for the next 10 
years as well as the discount rate after 10 years are determined by the 
investment consultant taking into account the current investment strategy 
shown in the table below.    Discount rate  
 
[approach  
amendment ] WT/BFA/W/57 7 
 
- 16 - 
 
 
 We support the approach amendment  put forward by the AWG and endorsed 
by the Management Board . 
Table 5: Current investment strategy   
  
Source: WTOPP   
47) As the assumption on the general salary increase (formerly referred to as 
“salary inflation”) is u nchanged,  we refer the interested reader to the full 
actuarial valuation report YE 2019  for more information .  General s alary   
increase  
 
- unchanged  - 
48) The assumption on the pension increase is u nchanged . Hence, it is still 
assumed that pensions are fully increased according to the expected inflation 
rate.  Pension increase  
 
- unchanged  - 
49) As the assumption on the the inflation rate is u nchanged,  we refer the 
interested reader to the full actuarial valuat ion report YE 2019  for more 
information .  Inflation  rate 
 
- unchanged  - 
50) The assumption on the administrative costs is unchanged. Note that the 
investment -related costs are taken into account in the determination of the 
expected net portfolio return (discount rate). Lastly, the assumed 0.2% of the 
pensionable remuneration is pr incipally too low given WTOPP’s past 
experience regarding administrative costs. Nevertheless, it is an appropriate 
assumption, as there typically is a moderate net gain stemming from events 
that occur within a particular year. These net gains are taken int o account in 
the determination of the assumption on administrative costs, since the 
projection model itself does not consider these gains as it works on an annual 
basis.  Administrative 
costs  
 
- unchanged  - 
Asset category Weight
Equities 50%
Developed Markets 32%
Emerging Markets 10%
Small Caps 8%
CHF Bonds 21%
CHF Bonds 4%
Emerging countries bonds 10%
Senior loans 7%
Real estate 20%
European real estate 5%
U.S. real estate 5%
Swiss real estate 10%
Other investments 5%
Insurance linked securities 5%
Cash 4%
Total 100%WT/BFA/W/57 7 
 
- 17 - 
 
 
   
 
4 Bundesamt für Statistik (BfS)  
5 The interested reader is referred to the full actuarial valuation report YE2019  what regards WTOPP’s past 
experience on disability .  51) Until year -end 2019 , mortality rates stem from an improved BVG 2015 table. 
However, in the meantime there is more recent information available as the 
technical f oundations BVG 2020 were published in December 2020. Moreover, 
it is reasonable not to produce an own opinion on the improvement of the 
mortality rates over time (especially due to medical progress) but to rely on 
the Swiss industry standard which is the c ohort table produced by the Swiss 
authority for statistics 4. This cohort table is contained in BVG 2020. Hence, 
this assumption change can be viewed as a nother  technical update.  
The following table especially shows the specific assumption on the 
improvement of BVG 2015 that was used until year -end 2019 .  Mortality  
 
[technical update]  
Table  6:  Mortality rates   
 
  
  
52) Until year -end 2019 , disability rates were modelled as 75% of the values 
contained in BVG 2015. As mentioned above, in the meantime there is more 
recent information available with BVG 2020. Furthermore, it is reasonable to 
use only 70% of the values contained in BVG 2020 even though these values 
are lower than the ones contained in BVG 2015. This can be justified by the 
average degree of disability  (which is around 80%)  as well as the less risky 
branch of busin ess of WTO compared to the Swiss average. Lastly, the 
decided assumption change is supported by the pension fund’s past 
experience.5 Hence, this assumption change can be viewed as another 
technical update.  Disability  
 
[technical update ] 
53) As the assumption on the termination rates (formerly referred to as 
“withdrawal”) is u nchanged,  we refer the interested reader to the full actuarial 
valuation report YE 2019  for more information . The following table shows the 
specific termination probabilities .  Termination  
 
- unchanged  - 
Projection period Male Female
2012-2020 1.50% 0.75%
2021-2035 0.75% 0.50%
2036+ None None31.12.2019
BVG 2015 with following improvements:31.12.2020 Assumption
Mortality BVG 2020 cohort tableWT/BFA/W/57 7 
 
- 18 - 
 
 
   Table  7:  Termination probabilities   
  
54) As the assumption on the early retirement rates is u nchanged,  we refer the 
interested reader to the full actuarial valuation report YE 2019  for more 
information . The following table shows the specific early retirement 
probabilities.  Early retirement  
 
- unchanged  - 
Table  8: Early retirement probabilities   
 
  
55) As the assumption on the individual salary increase s (formerly referred to as 
“competition and performance based salary increases”) is u nchanged,  we refer 
the interested reader to the full actuarial valuation report YE 2019  for more 
information . The following  table shows the specific individual salary increases.  Individual salary 
increase  
 
- unchanged  - 
Age Male Female Age Male Female Age Male Female Age Male Female
Up to 24 50.0% 50.0% 43 2.1% 3.4% Up to 24 50.0% 50.0% 43 2.1% 3.4%
25 21.0% 29.8% 44 2.0% 3.2% 25 21.0% 29.8% 44 2.0% 3.2%
26 19.5% 27.7% 45 1.8% 3.0% 26 19.5% 27.7% 45 1.8% 3.0%
27 18.0% 25.6% 46 1.7% 2.8% 27 18.0% 25.6% 46 1.7% 2.8%
28 16.4% 23.5% 47 1.6% 2.6% 28 16.4% 23.5% 47 1.6% 2.6%
29 14.9% 21.4% 48 1.5% 2.4% 29 14.9% 21.4% 48 1.5% 2.4%
30 13.4% 19.4% 49 1.3% 2.2% 30 13.4% 19.4% 49 1.3% 2.2%
31 11.9% 17.3% 50 1.2% 2.0% 31 11.9% 17.3% 50 1.2% 2.0%
32 10.4% 15.2% 51 1.1% 1.8% 32 10.4% 15.2% 51 1.1% 1.8%
33 8.9% 13.1% 52 1.0% 1.6% 33 8.9% 13.1% 52 1.0% 1.6%
34 7.4% 11.0% 53 1.0% 1.4% 34 7.4% 11.0% 53 1.0% 1.4%
35 5.8% 8.9% 54 1.0% 1.2% 35 5.8% 8.9% 54 1.0% 1.2%
36 4.3% 6.8% 55 1.0% 1.0% 36 4.3% 6.8% 55 1.0% 1.0%
37 2.8% 4.7% 56 0.9% 0.9% 37 2.8% 4.7% 56 0.9% 0.9%
38 2.7% 4.5% 57 0.7% 0.7% 38 2.7% 4.5% 57 0.7% 0.7%
39 2.6% 4.2% 58 0.6% 0.6% 39 2.6% 4.2% 58 0.6% 0.6%
40 2.4% 4.0% 59 0.4% 0.4% 40 2.4% 4.0% 59 0.4% 0.4%
41 2.3% 3.8% 60 0.0% 0.3% 41 2.3% 3.8% 60 0.0% 0.3%
42 2.2% 3.6% 61+ 0.0% 0.0% 42 2.2% 3.6% 61+ 0.0% 0.0%31.12.2020 31.12.2019
Age NRA 60 NRA 62 NRA 65 Age NRA 60 NRA 62 NRA 65
<55 0.0% 0.0% 0.0% <55 0.0% 0.0% 0.0%
55 8.0% 0.0% 0.0% 55 8.0% 0.0% 0.0%
56 8.0% 0.0% 0.0% 56 8.0% 0.0% 0.0%
57 11.0% 8.0% 0.0% 57 11.0% 8.0% 0.0%
58 10.0% 8.0% 0.0% 58 10.0% 8.0% 0.0%
59 25.0% 11.0% 0.0% 59 25.0% 11.0% 0.0%
60 25.0% 10.0% 8.0% 60 25.0% 10.0% 8.0%
61 25.0% 25.0% 8.0% 61 25.0% 25.0% 8.0%
62 25.0% 25.0% 20.0% 62 25.0% 25.0% 20.0%
63 25.0% 25.0% 20.0% 63 25.0% 25.0% 20.0%
64 25.0% 25.0% 20.0% 64 25.0% 25.0% 20.0%
65 100.0% 100.0% 100.0% 65 100.0% 100.0% 100.0%31.12.2020 31.12.2019WT/BFA/W/57 7 
 
- 19 - 
 
 
   Table  9: Individual salary increase s  
  
  
56) Until year -end 2019 , it has been assumed that all insured persons exiting the 
fund with more than 5 years of service opt for the deferred retirement benefit. 
However, the past experience of the pension fund sh ows that some of the 
insured persons under the age of 58  choose the withdrawal settlement. As 
that is the cheaper benefit this leads to actuarial gains. Thus, again the model 
can be made more realistic by making the choice between a withdrawal 
settlement a nd a deferred retirement benefit dependent on age. Hence, this 
assumption change can be viewed as another model amendment.  
57) The following table contains the specific probabilities used to model the 
exiting participant’s choice between a withdrawal settlemen t and a deferred 
retirement benefit.  Withdrawal -  
Deferred  
 
[model  
amendment]  
Age salary Age salary Age Salary Age Salary
35 3.80% 51            1.40% 35 3.80% 51            1.40%
36 3.80% 52 1.30% 36 3.80% 52 1.30%
37 3.60% 53 1.20% 37 3.60% 53 1.20%
38 3.50% 54 1.10% 38 3.50% 54 1.10%
39 3.40% 55 1.00% 39 3.40% 55 1.00%
40 3.10% 56 0.90% 40 3.10% 56 0.90%
41 2.90% 57 0.70% 41 2.90% 57 0.70%
42 2.60% 58 0.60% 42 2.60% 58 0.60%
43 2.30% 59 0.50% 43 2.30% 59 0.50%
44 2.10% 60 0.40% 44 2.10% 60 0.40%
45 2.00% 61 0.30% 45 2.00% 61 0.30%
46 1.90% 62 0.30% 46 1.90% 62 0.30%
47 1.80% 63 0.30% 47 1.80% 63 0.30%
48 1.70% 64 0.30% 48 1.70% 64 0.30%
49 1.60% 65 0.30% 49 1.60% 65 0.30%
50 1.50% 50 1.50%31.12.2019 31.12.2020WT/BFA/W/57 7 
 
- 20 - 
 
 
 Table  10: Choice between withdrawal settlement and deferred retirement benefit   
  
OLS stands for “ordinary least squares” which is a very widespread choice for calculating a linear statistical 
relationship. Obviously, the assumption (shown in red) is a bit on the conservative side which makes sense 
given the uncertainty regarding this c hoice. The uncertainty mainly stems from the fact that there are not so 
many data points available for analysis. The number of data points (number of persons exiting the fund with 
more than 5 years of service) are shown as numbers above the plue points (WT O-data).   
58) As the assumption on the lump sum probability (formerly referred to as 
“proportion of retiring staff electing to commute pension for lump sum ”) is 
unchanged,  we refer the interested reader to the full actuarial valuation report 
YE2019  for more information .  Lump sum:  
probability  
 
- unchanged  - 
59) As the assumption on the lump sum share (formerly referred to as 
“proportion assumed to be commuted at retirement ”) is u nchanged,  we refer 
the interested reader to the full actuarial valuation report YE 2019  for m ore 
information  Lump sum:  
share  
 
- unchanged  - 
60) Until year -end 2019 , the assumed probability to leave a surviving spouse at 
death was stated in the report independent of the age at death as it consisted 
only of two values: one for males  (80%)  and one for females  (60%) . However, 
the probability to leave a surviving spouse at death is heavily age -dependent, 
as there is a marriage effect (younger ages) and a survival effect (older ages). 
Assuming that Mercer used a reasonable approach to cope wit h these two 
effects, this assumption change can be viewed as a disclosure of a previously 
implicit assumption .  
The mentioned marriage effect ( very young participants are not likely to be 
married) and the survival effect (very old beneficiaries are not lik ely to leave a 
surviving spouse) are both fully contained in the probabilities to leave a Proportion  
married on death  
 
[disclosure]  
WT/BFA/W/57 7 
 
- 21 - 
 
 
 surviving spouse published in BVG 2020. This gender -specific age -dependent 
curve has been scaled to fit the level information of WTOPP  in the age region 
from 55 to 75  years . The multiplicative scaling factor is 12 3% for males and 
139%  for females, respectively.  
61) The following two table s contain the specific probabilities used to leave a 
surviving spouse.   
Table  11: Probability to leave a surviving spouse: MALE   
  
“Original” (blue) depicts the unchanged BVG 2020 values whereas “shifted 2” (red) shows the BVG 2020 
curve shifted according to the level information of WTO (green).   
Table  12: Probability to leave a surviving spouse : FEMALE   
  
“Original” (blue) depicts the unchanged BVG 2020 values whereas “shifted 2” (red) shows the BVG 2020 
curve shifted according to the level information of WTO (green).   
62) Until year -end 2019 , the assumed age difference between spouses upon 
death w as independent of the age at death as it consisted only of two values: 
one for males  (-3 years ) and one for females  (+3 years ). This assumption has 
been improved by choosing age -dependent values which allows for taking 
into account both the marriage effect  (younger ages)  as well as the survival Age difference 
upon death  
 
[model  
amendment]  
WT/BFA/W/57 7 
 
- 22 - 
 
 
 effect  (older ages) . Hence, this assumption c hange can be viewed as a nother  
model amendment.  
63) The mentioned marriage effect (very young persons  are not likely to be 
married) and the survival effect (very old spouses  are not likley to live longer 
than the corresponding beneficiary ) are both fully contained in the age 
differences between spouses  published in BVG 2020. This gender -specific 
age-dependent curve has been shifted  to fit the level information of WTOPP  
in the age region from 55 to 75 . The additive shift  paramete r is -0.7 y ears for 
males and +0.1 years  for females, respectively.  
64) The following two table s contain the specific age difference between spouses 
used upon death.   
Table  13: Age difference between spouses upon death: MALE   
  
“Original” (blue) depicts the unchanged BVG 2020 values whereas “shifted” (red) shows the BVG 2020 curve 
shifted according to the level information of WTO (green).   
Table  14: Age difference between spouses upon death : FEMALE   
  
WT/BFA/W/57 7 
 
- 23 - 
 
 
   “Original” (blue) depicts the unchanged BVG 2020 values whereas “shifted” (red) shows the BVG 2020 curve 
shifted according to the level information of WTO (green).   
65) The assumption on the active head count  is unchanged . Hence, it is still 
assumed that the number of participants stays constant after the first 
projection year. In order to achieve the assumed number of participants at the 
end of the first projection year the entries in the first projection year are 
chosen accordingly.  Active head count  
 
- unchanged  - 
66) As the assumption on the new entrants  (formerly referred to as “ new joiners’ 
profile ”) is unchanged,  we refer the interested reader to the full actuarial 
valuation report YE 2019  for more information .  New entrants  
 
- unchanged  - 
67) The following table contains the specific assumptions used for new entrants.   
Table  15: New entrants   
  
PR: pensionable remuneration   
  
New entrants Male:
Age, Weight, PR27, 11.75%, 100'000
39, 31.75%, 140'00027, 11.75%, 100'000
39, 31.75%, 140'00031.12.2020 31.12.2019
New entrants Female
Age, Weight, PR27, 19.75%,  90'000
39, 36.75%, 110'00027, 19.75%,  90'000
39, 36.75%, 110'000WT/BFA/W/57 7 
 
- 24 - 
 
 
 3.3 Method s 
3.3.1 Summary  
68) The approach used to complete the present  full actuarial valuation  report  is 
summarized b y the table b elow .  Approach :  
Phases  
Table  16: Actuarial v aluation  approach   
 
  
  
3.3.2  Description  
69) The valuation process is based on standard actuarial processes  and methods as 
well as  the assumptions set out in Section  3.2. The actuarial valuation is 
performed using two different  perspectives :  
• Open -group valuation (OGV)  
• Closed -group valuation (CGV)  OGV / CGV  
70) The open -group valuation analyses the ongoing perspective. Hence, the 
pension plan is assumed to continue.  OGV  
71) In contrast to this, the closed -group valuation assumes that the pension plan is 
discontinued immediately and hence, analyses the liquidation p erspective.  CGV 
72) The question clearly is whether the open -group valuation or the closed -group 
valuation is the relevant one. Principally, the answer to this question depends 
on the probability of a dissolution of the WTO. If there is (no) a dissolution th en 
the (open -group) closed -group valuation is decisive.  Dissolution?  
73) However, as it is clear to the relevant stakeholders that the members – and not 
the WTO  pension plan  – need to finance the underfunding in the case of a 
dissolution (liquidation perspect ive) of the WTO, the pension fund can focus on 
the open -group valuation (ongoing perspective).  OGV is possible…  
74) Given the long -term nature of the fund and for the sake of continuity as well as  
high benefits (relative to the actual contributions) this mak es perfectly sense.  OGV is  
reasonable…  
Phase 1 Phase 2 Phase 3 Phase 4
Data Collection Determination of 
assumptions & 
methodologyProduction of draft 
results for open- and 
closed-group Presentation and 
discussion of results
Outputs
Reconciliation of 
dataSetting up valuation 
modelMain results Final reportWT/BFA/W/57 7 
 
- 25 - 
 
 
   
 
6 See chapters 0 and 3.3.2.3 . 75) Hence, the relevant perspective for steering the fund into the future was and 
still is the open -group valuation (ongoing perspective).  …OGV is relevant!  
76) Before we give more information about how the open -group valuation and the 
closed -group valuation have been conducted6, we first want to provide some 
information about the used projection software in the next chapter.  What follows?  
3.3.2.1  Projection Software   
77) Our self -developed projection software QUANTU S allows us to perform 
dynamic projections of liabilities, plan assets and all cash -flows over any time 
horizon. Furthermore, QUANTUS fully works on an individual basis which means 
that each plan participant and each beneficiary is modelled fully individua lly. 
This fully individual approach requires a stochastic modelling as f.e. the 
probability that a 35 year -old male plan participant exits the pension fund 
either hits or it does not hit. Of course, we compute a sufficient number of 
trajectories in order t o achieve stable results. All these trajectories (different 
possible developments) are finally averaged to produce the expected path of 
the pension fund.  QUANTUS  
78) These projections show the future development of the pension plan given the 
current insured population and plan regulations as well as various actuarial 
assumptions. Clearly, especially uncertain and important assumptions can be 
changed to analyse their im pact on the fund (sensitivity analysis). Moreover, 
the expected development of the pension plan can be used to identify and 
analyse potentially necessary reforms.  Insights  
79) The above -described projection software solution QUANTUS perfectly fits the 
require ments of the WTOPP as it contains many specialities. For instance, a plan 
participant is only eligible for a retirement benefit if he or she exhibits more 
than 5 years of service. Furthermore, the amount of an early retirement benefit 
depends both on the i ndividual’s adjusted years of service as well as his or her 
entry date. All the mentioned plan conditions (specialities) and many more plan 
features can only be  adequately  modelled with a fully individual projection 
software. Thus, our projection software QUANTUS is clearly the right choice.  WTOPP :  
many speci alities  WT/BFA/W/57 7 
 
- 26 - 
 
 
 3.3.2.2  Open -Group Valuation   
80) As stated above the open -group valuation assumes that the pension plan 
continues (ongoing perspective).  Ongoing  
perspective  
81) Hence, we model  new entrants into the plan in the future . These entrants 
principally replace th e participants leaving the pension  fund through  exit, 
(early)  retirement, disability and death. Beyond this, the number of entrants is 
chosen in each projection year such that the assumed growth in the population 
of plan participants is achieved . The assumed growth in the population of plan 
participants as well as the profile of the new entrants can be found in 
Section  3.2.  New entrants  
82) To reflect the long -term perspective of the open -group valuation (ongoing 
perspective) we model WTOPP in the first 100 years as an open fund7 (with new 
entrants every year). After 100 years, the fund is closed which means that no 
further entrants are being modelled afterwards. Thus, there is a run -off 
considering the plan participants and the beneficiaries that are in the pension 
fund after the  first 100 years.  Approach :  
100 open years  
+ runoff  
83) The funding principle of WTOPP is that the existing assets together with the 
future contributions  (of current and future plan participants)  and the future 
investment income s need to finance all the fu ture benefits  and administrative 
costs . The benefits  consist of the benefits of the current beneficiaries as well as 
of the benefits of the current  plan participants  and the future participants ( new 
entrants ).  Funding principle  
84) Hence, what has to be computed in the open -group valuation are the following 
cash flows:  
• Contributions  
• Investment income  8 
• Benefits  
• Administrative costs  
Thus , we have to compute two cash inflows and two cash outflows. The 
projection of these cash flows is shortly described next.  Cash flows  
85) The contributions are computed by multiplying the actual contribution rate 
with the pensionable remunerations. However, there are con tributions being 
paid by the current plan participants as well as by the future plan participants 
(new entrants). Hence, the fluctuations in the population of active insured 
participants plays a role. Moreover, contributions are influenced by the general 
salary increase, the individual salary increases and the level of employment.  Contributions  WT/BFA/W/57 7 
 
- 27 - 
 
 
  
7 To see the long -term perspective of these 100 years the reader should n ote that discounting the next 10 years 
with a discount rate of 3. 8% and the next 90 years with a discount rate of 4.5% leads to a discount factor of only 
1.3% for the  year 100.  
8 Strictly speaking , not the entire investment income is a cash -flow as it includes unrealized capital gains. Moreover, 
it is the only asset -driven variable. The other above -mentioned cash flows are all liability -driven.  
9 The expected net portfolio return depends on the cur rent investment strategy as well as the expected returns of 
the various involved asset classes  including their investment costs .  
10 For instance , by the accrual rates used in the determination of a retirement benefit or the reduction factors in 
case of an early retirement benefit.  86) Investment income mainly depends on the expected net portfolio return9 and 
the level of assets. For the expected net portfolio return we use the discount 
rate given in Section 3.2. Clearly, the level of assets changes over time. To 
project the assets over one ye ar one needs the level of assets at the beginning 
of the year which increases over the year due to the contributions  as well as the 
investment income  and decreases due to the benefit payments and the 
administrative costs.  Investment  
income  
87) Clearly, bene fits can arise due to insured events occurring. These events consist 
of (early) retirement, disability and death. Basically, the total benefits can be 
broken down to the benefits of the c urrent beneficiaries  as well as the benefits 
of the current plan part icipants and the future plan participants (new entrants). 
Essential for the current plan participants are especially their acquired years of 
service whereas the benefits of the future plan participants strongly depend on 
the entrants’ profile (assumed age and salary upon entry). Both the benefits of 
the current plan participants as well as the benefits of the future plan 
participants further depend on various demographic assumptions as the 
termination probabilities, the retirement probabilitie s, etc.  
Moreo ver, future benefits are influenced by the development of the 
pensionable remunerations as new benefits are computed as a certain 
percentage of the final average remuneration (FAR) which in turn depends on 
a certain number of the last pensionable remunerat ions before the insured 
event. Furthermore, future benefits are directly influenced by the Regulations .10 
Lastly, all benefits grow with the assumed pension increase rate  over time.  Benefits  
88) The administrative costs are modelled a s an appropriate  percentage of  the 
pensionable remunerations  discussed above.  Administrative 
costs  
89) With all the projected cash inflows and cash outflows at hand one can analyse  
the sustainability of the pension fund. Basically, this can be done in two 
manners. One way is to analyse the development of the assets and the various 
cash flows over time.  In particular , this involves analysing the time point in the Time : 2 ways  WT/BFA/W/57 7 
 
- 28 - 
 
 
 future when the asse ts will be exhausted for the first time.  The other way is to 
compute the present value  (today’s value)  of the various cash flows and 
compare them with the current level of assets.  
90) Following the second way leads to the c alculated c ontribution rate  (CCR)  which 
is defined as:  
𝐶𝐶𝑅 =𝑃𝑉 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 −𝐴𝑠𝑠𝑒𝑡𝑠
𝑃𝑉 𝑃𝑒𝑛𝑠𝑖𝑜𝑛𝑎𝑏𝑙𝑒  𝑅𝑒𝑚𝑢𝑛𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠 
 
where PV stands for “ present value ”.  CCR:  
Formula  
91) First, we want to note that the above formula for the calcula ted contribution 
rate takes into account the current assets as well as the necessary contributions 
as its formula can be rewritten as:  
𝐴𝑠𝑠𝑒𝑡𝑠 +𝐶𝐶𝑅 ∗𝑃𝑉 𝑃𝑒𝑛𝑠𝑖𝑜𝑛𝑎𝑏𝑙𝑒  𝑅𝑒𝑚𝑢𝑛𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠  =𝑃𝑉 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠  
 
The last funding source besides the above -mentioned current assets and the 
contributions are the investment incomes. These are implicitely considered with 
the computation of the present values that uses the discount rate (expected 
net portfolio return). Al l three funding sources must be sufficient to finance all 
future benefits and administrative costs.  CCR:  
Interpretation  
92) Note that the administrative costs are missing in the formula of CCR. However, 
this is not a problem at all, as the administrative co sts are assumed to be an 
appropriate percentage of the pensionable remunerations. Hence, the required 
contribution rate (RCR) equals the calculated contribution rate (CCR) plus this 
percentage : 
𝑅𝐶𝑅 =𝐶𝐶𝑅 +𝑥𝑎𝑑𝑚𝑖𝑛   𝑐𝑜𝑠𝑡𝑠 RCR:  
Formula  
93) Of course, the  main  components  (benefits and pensionable remunerations)  in 
the formula of the calculated contribution rate can be broken down to the 
different groups of persons. The benefits can be attributed to the current 
beneficiaries as well as to the cur rent plan participants and the future plan 
participants (new entrants). The pensionable remunerations can be split to the 
current plan participants and the future plan participants.  Groups of persons  
94) Finally, to check the  long-term  sustainability of the pension fund  (ongoing 
perspective)  it only remains to compare the actual contribution rate set out in 
the WTOPP Regulations to the required contribution rate discussed above. This 
comparison allows to judge whether the actual contrib ution rate is s ufficient ly Sustainabil ity WT/BFA/W/57 7 
 
- 29 - 
 
 
 high to meet  all the  future expen ditur es (benefits and administrative costs)  of 
the pension  plan.  
95) Following the first way to measure the sustainability of the pension plan 
particularly leads to the following pivotal points in time:  
• The first pivotal time point is when the annual contributions are not 
sufficient anymore to cover the annual benefits  and the annual 
administrative costs . This is the point in time when the pension plan starts 
consuming its investment income.  
• The second pivotal time point occurs when the sum of the annual 
contributions and the annual investment income is not sufficient anymore  
to cover the  annual benefits  and the annual administrative costs . This is 
the point in time when the pension plans’ assets start to decrease.  
• The third and final pivotal time point is when the assets are exhausted and 
there are no asset s left to pay the plan’s expenditures (benefits and 
administrative costs).  Pivotal time 
points  
3.3.2.3  Closed -Group Valution   
96) As stated in chapter 3.3.2  the closed -group v aluation assumes that the pension 
plan discontinues immediately and hence, analyses the liquidation perspective. 
Therefore, this is the relevant perspective in the case of dissolution of the WTO.  Liquidation  
perspective  
97) The security of benefits in the event of dissolution of the WTO is governed by 
Article 21 of the Regulations which states that:  
“In the event of dissolution of the WTO, the General Council shall take the 
necessary steps to guarantee the benefits acquired under these  Regulations  
by participants  and beneficiaries  at the date of dissolution ”.  Dissolution :  
Art 21 Regulations  
98) Hence, the closed -group valuation does not include any new entrants but only 
analyses the pension fund’s position with the current plan participants and the 
current beneficiaries.  Current insured 
population only  
99) According to the Art. 21 of the Regulations state d above the underlying 
assumption in the closed -group valuation is that the pension plan continues to 
provide benefits (guarantee acquired benefits) to its current beneficiaries and 
convert the plan participants  into beneficiaries by ceasing future benefi t 
accrual and converting their past service accrual (according to their current 
years of service) into either an immediate (early) retirement benefit, a deferred 
retirement benefit or a withdrawal settlement (guarantee acquired benefits).  Guarantee  
acqui red benefits  WT/BFA/W/57 7 
 
- 30 - 
 
 
 100) Specifically, the closed -group valuation models the current plan participants as 
follows:  
• For the participants eligible for (early) retirement, it is assumed that the 
(early) retirement benefit commences immediately  
• For all other participants with less than 5 years of service, it is assumed 
that the withdrawal settlement is paid out immediately  
• For all other participants with more than 5 years of service, the assumed  
age-dependent probabilities are used to model the choice between a  
withdrawal settlement and a deferred retirement benefi t Current  
participants  
101) The benefits of the current beneficiaries are calculated using the same 
approach as for the open -group valuat ion. Current  
beneficiaries  
102) We envisage that in the case of dissolution the WTOPP’s  investment strategy 
would be converted to a (much) more conservative portfolio investing in high -
quality Swiss corporate bonds with the goal of immunizing the assets in line 
with the pension plan’s benefits outlay. This simply reflects the fact that in th e 
closed -group valuation there are no further contributions paid into the pension 
fund which means that there are only cash outflows (benefits and 
administrative costs). In such a situation the pension fund’s risk capability is 
heavily reduced and hence, t he pension plan has to be managed in a (much) 
more conservative manner.  Investment  
strategy :  
bonds!  
103) The financial assumptions used for the closed -group valuation are consistent 
with the assumptions used in closed -group actuarial valuations for private 
sector companies. Liabilities are calculated using a long -term market interest 
rate and an inflation expectation. These assumptions are set out in the table 
below.  Financial  
assumptions  
Table  17: Closed -group valuation: financial assumptions   
 
  
Note that a  closed -group val uation was no t performed in every year.   
DateNominal 
interest rateInflation 
rateReal 
interest rate
31.12.2010 2.80% 1.10% 1.70%
31.12.2011 2.90% 1.00% 1.90%
31.12.2012 2.10% 0.60% 1.50%
31.12.2013 2.60% 0.80% 1.80%
31.12.2014 1.10% 0.80% 0.30%
31.12.2015 1.00% 0.60% 0.40%
31.12.2016 0.70% 0.60% 0.10%
31.12.2019 0.40% 0.70% -0.30%
31.12.2020 0.13% 0.13% 0.00%WT/BFA/W/57 7 
 
- 31 - 
 
 
   104) As in the open -group valuation we assume that the pension increase rate 
equals the assumed inflation rate given above in  Table  17.  Pension increase  
105) It is important to note that at the year -end 2019 the assumptions on the 
nominal interest rate (0.4%) and the inflation rate (0.7%) lead to a negative real 
interest rate ( -0.3%) which does not really make sense, in particular, as the 
modelled run -off in the closed -group valuation occurs over many years. 
Furthermore, the assumption on the inflation rate (0.7%) was inconsistent to 
the open -group  valuation (1.0%).  Previous  
assumptions  
106) For the year -end 2020 (and also in the future) we  principally  assume the same 
inflation rate in the closed -group valuation as in the open -group valuation for 
the sake of consistency.  Moreover, we use the nominal interest rate determined 
by the market yields of high -quality  (credit rating AA -AAA)  Swiss corporate 
bonds with a duration of 2 0 years. If this however, leads to a negative real 
interest rate, than we decrease the (uncertain) assumption on expected inflation 
such that a real interest rate of 0% results.  Because the real interest rate would 
be negative with an inflation rate according to the open -group valuation,  we 
use a  reduced  inflation rate of 0.13%  for the clos ed-group valuation at the year -
end 2020 . New assumptions : 
improvements  
107) It is important to note that all the other assumptions (the ones not mentioned 
in Table  17) are chosen as in the open -group valuation (if applicable).  All other  
assumptions  
108) As in the previous years the closed -group valuation does not consider any 
administrative costs of operating  a discontinued plan. These costs would 
certainly be lower than the current administrative costs of operating an 
ongoing pension plan.  No administrative 
costs  
109) Lastly, as in the previous years we have not taken into account the cost of 
“buying out” benefi ciaries’ liabilities with an insurance company which may 
significantly exceed the calculated value. Such buying -out costs can depend 
very much on the specific situation of the insurance industry. Furthermore, 
these costs are not observable but would have t o be determined by a costly 
procurement process.  No Buy -out costs  WT/BFA/W/57 7 
 
- 32 - 
 
 
   3.4 Results  
110) In this Section we show the most important results in the open -group valuation 
(ongoing perspective) as well as the closed -group valuation (liquidation 
perspective). These two different perspectives are described in Section 3.3. OGV / CGV  
3.4.1 Open-Group  Valuation  
111) The open -group valuation method is thoroughly described in chapter 0.  Method  
112) We first analyse the sustainability of the WTOPP  with the present values of the 
various cash flows and the current level of assets in  chapter 3.4.1.1 . Afterwards, 
we consider the development of the assets and the various cash flows over time 
in chapter 3.4.1.2 .  Outlook  
3.4.1.1  Required Contribution Rate 
Derivation:   
113) The following table contains the derivation of the required contribution rate  
(RCR) .  Derivation  of RCR  
Table  18: Derivation of the required contribution rate   
 
    
PV: present value   
in MCHF 31.12.2020 31.12.2019
A Assets 666                     631                     
B PV Benefits
a) Current beneficiaries 439                     414                     
b) Current participants 848                     812                     
c) Future participants (new entrants) 613                     428                     
Total [a+b+c] 1’899                  1’654                  
C PV Pensionable remuneration
a) Current participants 1’156                  1’335                  
b) Future participants (new entrants) 2’471                  2’149                  
Total [a+b] 3’627                  3’484                  
D Calculated contribution rate (CCR)
[(B-A)/C] 34.0% 29.3%
E Administrative costs 0.2% 0.2%
F Required contribution rate (RCR)
[D+E] 34.2% 29.5%WT/BFA/W/57 7 
 
- 33 - 
 
 
 114) The required contribution rate  (RCR)  increases from 29.5% at year -end 2019  to 
34.2% at year -end 2020 . This significant change can be explained by numerous 
effects. The change in the consulting actuary , however,  is almost insignificant. 
In the following, all changes are explained step -by-step.  Discussion  
Reconciliation:   
115) The following plot shows the change of the required contribution rate (RCR) 
from year -end 2019  till year -end 2020 . This involves the change in the six 
mentioned  assumptions as well as the change in the consulting actuary (change 
of model).  Change RCR:  
YE2019 -> YE 2020  
Plot 5: Reconciliation of the required contribution rate: YE 2019  -> YE2020   
  
  
116) The starting point is the required contribution rate (RCR ) at year -end 2019  
given in Table  18. Of course, this RCR of 29.5% stems from the full actuarial 
valuation report at year -end 2019  prepared by Mercer.  RCR at YE 2019 
117) The first step in the reconciliation of the RCR displayed  in Plot 5 is a technical  
correction made after the preparation of the draft actuarial valuation report at 
year-end 2019 presented in Appendix A4. The correction concerns the 
discounting calculation and  increases the required contribution rate by 0.8%.  Discounting   
correction  
118) The change in the RCR due to the change in the consulting a ctuary  (change of 
model) amounts to  0.3%  only. The relative difference is 1.1% and can be judged 
to be  very low given th e complex task of modeling WTOPP with all its 
specialities over the next 100 years as an open fund with a subsequent run -off.  Change  in actuary   
29.5% 0.8% 0.3% -0.2% 0.9% -0.2%3.1% 34.2%
​ ​ ​ ​ ​ ​ ​ ​ 0%5%10%15%20%25%30%35%40%
RCR YE2019
Discounting Correction
Change in actuary
Change asset value
(smoothed -> market)
Update population to
YE2020
Update assets (expected
to actual)
Update actuarial
assumptions
RCR YE2020WT/BFA/W/57 7 
 
- 34 - 
 
 
   119) As already discussed in chap ter 3.2, the previously used asset  smoothing 
method involves subjective  choices and other shortcomings. Thus, it was 
decided to abolish this asset smoothing method and to use the market value 
of asset s instead (the only existing value).  It now appears that the switch from 
smoothed value to market value  has a very small effect on the RCR ( -0.2% -
points).  Change a sset 
value  
120) As already shown in Chapter 3.1.1 , the insured population has changed 
compared to the previous year. The small decrease in the number of plan 
participants and the  considerable  increase in the number of beneficiaries  leads 
to an increase in the RCR of 0.9% -points . As the step of updating the insured 
population to year -end 2020  uses the expected value of assets for the  year-end 
2020 , the mentioned considerable increase in the RCR shows t he burden that 
the pension fund bears from the past. The current asset level is not  suffici ently 
high given the accrued benefits of the current plan participants and 
beneficiaries .  Update   
population  
121) Based on last year's projection, the market value of asset s was expected to be 
657 MCHF  at year -end 2020  . However, the actual market value of assets a t the 
year-end 2020  amounts to 666 MCHF. There are two mai n reasons for the 
higher than expected market value of asset s and thus, the correspondingly 
lower RCR. The net return on the assets was not 3.7% as assumed in the 
projection model, but 4. 2% (see als o section 3.1.2 ). In addition, the net cash 
flow in 2020  was not negative as assumed in the model ( -3.7 MCHF)  but slightly 
positive (0.2 MCHF) a ccording to WTOPP’s income statement.  Update assets  
122) Lastly, t he change in the remaining five (out of the  seven mentioned ) actuarial 
assumptions increase s the required contribution rate by 3.1% -points. The main 
driver of this total effect is the change  in the used mortality rates  from BVG 
2015  with self -constructed improvements  to BVG 2020  cohort table . The 
individual effect of each assumption can be found in the subch apter  below .  Update actuarial 
assumptions  
123) Starting with the required contribution rate at year -end 2019  of 29.5% and 
adding up all the above -mentioned changes leads to the required contribution 
rate at year -end 2020  of 34.2%.  RCR at YE 2020  
2019  
Change in assumptions:   
124) As mentioned above, the change in all actuarial assumptions leads to a 
considerable increase in the RCR of 3.1% -points  Hence, the individual effects 
of all changed assumptions are shown in Table  19 and explained in more detail 
below . Assumptions 
change … WT/BFA/W/57 7 
 
- 35 - 
 
 
 Table  19: Reconciliation of the required con tribution rate: Assumptions   
  
  
125) The previous assumption used an age difference of -3 years for males and +3 
years for females. The new assumption however, consists of an entire age -
dependent curve as there is a marriage effect (very young ages) and a survival 
effect (older ages), which m ake the age difference between spouses upon death 
heavily age -dependent. As the new assumption mainly leads to lower ages for 
the surviving spouse, this assumption change leads to an increase in the RCR. 
Yet, this increase amounts to 0.3% -points only and h ence, can be judged to be 
small.  Age difference 
upon death  
 
126) Previously, every plan participant exiting the pension fund with more than 5 
years of service was assumed to opt for the deferred retirement benefit. The 
new assumption however, models the choic e between the withdrawal 
settlement and the deferred retirement benefit dependent on age. As the 
withdrawal settlement is the cheaper benefit, this assumption change leads to 
a decrease in the RCR. Yet, this decrease amounts to only  0.1% -points  and 
hence, can be judged to be very small . Withdrawal  
- deferred  
 
127) Previously , self-constructed mortality improvements were applied to BVG 2015. 
The new assumption however, uses BVG 2020 as a cohort table ( Swiss industry 
standard ). As BVG  2020 cohort table assumes that mortality improvements do 
not stop in the year 2035 (like the previous assumption did), this assumption 
change leads to an increase in the RCR. Since this increase amounts to 3.4% -
points , it has to be judged to be quite big.   Mortality  
 
128) Previously, the assumed disability rates were 75% of the values contained in 
BVG 2015. The new assumption however, uses 70% of the disability rates in BVG 
2020. As the new assumed disability  rates are lower , this assumption change 
leads to a decrease in the RCR. Since this decrease amounts to 0.4%-points , it 
can be judged to be small .  Disability  
 
129) The previous assumption for the discount rate  over the next 10 years was  3.7%. 
The new assumption however, uses  a value  of 3.8%. As the new discount rate 
for the next 10 years is higher, this assumption change leads to a decrease in Discount rate  
 
Individual assumption effects Change in RCR
Age difference upon death 0.3%
Withdrawal - deferred -0.1%
Mortality 3.4%
Disability -0.4%
Discount Rate -0.2%
Total effect 3.1%WT/BFA/W/57 7 
 
- 36 - 
 
 
 the RCR. Yet, this decrease  amounts to only  0.2% -points  and hence, can be 
judged to be small . 
130) Lastly, we discuss the sum of the effects of the assets update (see Plot 5) and 
the update of the discount rate (see Table  19). These two updates lead to a 
total reduction in the RCR of about 0.4% -points. As this decrease in the RCR 
can be judged to be small, there is no need to discuss the difference between 
the previou sly used smoothed asset value in combination with a sticky discount 
rate over the next 10 years and the newly used market value of assets in 
combination with a discount rate over the next 10 years which is determined 
using the available current market info rmation.  Update of Assets 
+ Discount rate  
Total change:   
131) Clearly, the required contribution rate at year -end 2020  of 34.2%  (see Plot 5) is 
much greater than the actual contribution rate of 23.7%. The act uarial gap in 
terms of contribution rate amounts to 10.5%.  Result :  
Big gap…  
132) This big gap shows that a reform is absolutely necessary.  Principally, the 
pension fund can be put back into a reasonable actuarial position by decreasing 
certain benefits and/or by increasing the actual contribution rate.  …Reform  
necessary!  
133) However, there are many details regarding the necessary reform that need to 
be analysed and discussed. For instance, there are several different benefit 
types that can be reduced, benefits can be reduced for certain groups of 
participants and beneficiaries  only and lastly, any actions on the benefit and/or 
the contribution side can be carried out step -wise over time. We will gladly 
assist the WTOPP in any work regarding this necessary reform.  Reform:  
many details…  
134) The explanation for the very high value o f the required contribution rate of 
34.2% lies in  the past of the WTOPP. The current level of assets is simply much 
too low relative to the accrued benefits  of the current plan participants and the 
current beneficiaries.  Reason for big 
gap: Burden from  
the past  
 
135) The best way to show this burden from the past  is to compute the required 
contribution rate with a newly starting pension fund. To this end, one has to 
run the projection model with plan participants with zero years of service (no 
accrued benefi ts). Furthermore, the pension plan obviously has to start with no 
current beneficiaries and zero assets. The required contribution rate of such a 
newly starting pension fund amounts to 25.6%  which is 8.6%-points below  the 
RCR of WTOPP . This clearly  shows t he big burden stemming from the past.  Burden from the 
past: RCR of new  
population  
136) With the reconciliation of the required contribution rate from year -end 2016 till 
year-end 2019 given in  Plot 2 and the reconciliation of the required Actuarial gap  WT/BFA/W/57 7 
 
- 37 - 
 
 
 contribution rate from year -end 2019  till year -end 2020  given i n Plot 5, the 
development of the actuarial gap can easily be derived, since the actual 
contribution rate has been kept unchanged over the entire time period at 
23.7%. The following plot shows the development of the actuarial gap from 
year-end 2016 till year -end 2020 .  
Plot 6:  Development of the actuarial gap: YE2016 -> YE2020   
 
  
Source: Draft full actuarial valuation report of Mercer at year -end 2019 (used for the time period from year -
end 2016 till year -end 2019) and QUANTUS projection tool c -alm (used for the time period from year -end 
2019 till year -end 2020)   
137) As the above plot  shows, the actuarial gap at year -end 2016 amounted to 
0.7% only. However, it increased to 5.8% at year -end 2019 due to the changed 
assumptions. Taking into account the discounting correction shown in  Plot 5 
the actuarial gap at year -end 2019 even amounts to 6.6%. Afterwards, the 
actuarial gap further increased to 10.5% at year -end 2020. Again, this increase 
has mainly been driven by a change in assumptio ns. It is important to note 
that the majority of this large  actuarial gap has already been detected by the 
previous consulting actuary at year -end 2019. Without (with) the discounting 
correction 55% (63%) of the actuarial gap of 10.5% at year -end 2020 has 
already been detected at year -end 2019.  Discussion  
Analysis of specific risks:   
138) Since there are considerable assets to invest, one of the main risks is clearly the 
investment risk. The required contribution rate presented in this report is only 
sufficient if the pension fund achieves net portfolio returns in the future which 
cover the  assumed discount rate on average. Thus, the investment performance 
needs to be monitored closely and the investment strategy needs to be 
adjusted if necessary.  Investment risk  
WT/BFA/W/57 7 
 
- 38 - 
 
 
 139) In order to get a feeling for the sensitivity of the pension fund’s actuarial 
position to investment risk, we have calculated the required contribution rate 
assuming that the discount rate (DR) is 1.0% lower at all times and hence, that 
the net portfolio r eturn target is missed by 1.0% in every future year. Of course, 
such a scenario is extremely unlikely if the discount rate given in Section 3.2 is 
appropriate. However, if one judges the discount rate given in Section 3.2 to be 
overly optimistic then the discussed scenario clearly makes more sense. As the 
required contribution rate in this scenario amounts to 42.4%, a reduction in the 
discount rate of 1.0% increases the RCR by 8.2%. This big gap clearly shows the 
importance of the investment risk.  Scenario 1:  
DR: -1.0% 
140) Another potentially importan t risk is the real promise of the fund as it provides 
full cost -of-living adjustments  to its pensions . It is clearly difficult to finance real 
pensions (full pension increases according to inflation) with nominal means.  
Inflation risk has been unusually low in the past and central banks were able to 
carry out their quantitative easing. But this can look very different in the future 
as the major central banks have already started to tighten their monetary policy 
in order t o fight the increasing inflation  rates .  Pension  
increase risk  
141) Given this it seems interesting to compute the required contribution rate in a 
scenario where the inflation rates (IR) are 1.0% higher than assumed in 
Section  3.2 at all times. As the pension fund promises full cost -of-living 
adjustments to its pensions, we also assume that the pension increase rates 
(PIR) are increased by 1.0%. Moreover, it makes sense to assume that the real 
wages will remain unchanged, which is why we assume that the general salary 
increase rates (GSIR) are also increased by 1.0%. Lastly, we assume that the 
Fisher parity holds, which means that the nomina l interest rates increase by 
1.0% as well and therefore that the real interest rates remain unchanged. In 
such a setting it seems reasonable to assume that the discount rate (DR) is 1.0% 
higher as well, especially as the discount rate after 10 years is det ermined using 
a constant risk premium approach. The required contribution rate in such a 
scenario amounts to 33.8% and hence, lies moderately lower than the RCR of 
34.2% that results with the assumptions given in Section 3.2 (base scenario). 
However, we cannot assume that the asset development is unaffected by the 
assumed initial increase in the inflation rate and the nominal interest rate. 
Roughly, assuming reasonabl e durations for all asset categories contained in 
the current investment strategy leads to a portfolio duration of 2.2 years. Hence, 
the initial shock results in a reduction in the current assets of 2.2%. This effect 
causes an increase in the RCR of 0.4% w hich means that the RCR in scenario 2 
taking into account the initial transition effects amounts to 34.2%. Clearly, there 
is no difference to the RCR in the base scenario at all. Hence, the pension funds’ Scenario 2:  
IR/PIR/GSIR/DR: 
+1.0%  WT/BFA/W/57 7 
 
- 39 - 
 
 
  
11 Strictly speaking investment income is not  only a cash flow since it contains also unrealized capital gains.  actuarial position is not affected by the assumed i ncrease in the inflation rates. 
However, this is only the case if the general salary increase rates (contributions!) 
and the discount rates (investment incomes!) increase analogously to the 
inflation rates. If the increase in these two variables is smaller  than the assumed 
increase in the inflation rates then the actuarial position of the pension fund  
(clearly)  worsens. The above -discussed scenario 1 shows this what regards the 
discount rates.  
3.4.1.2  Cash -Flow Analysis  
142) After having compared the present value of the various cash flows to the 
current level of assets in the previous chapter, we now analyse the development 
of the assets and the various cash flows over time.  Development   
over time  
We start by first comparing the liability -driven cash flows:  
• Contributions  
• Benefits  
• Administrative costs  Liability -driven 
cash flows  
143) The asset -driven cash flows will be analysed  later when we add the investment 
income11 to the above -mentioned cash flows.  Asset -driven  
cash flows: later…  
144) The following plot shows the expected development of the above -mentioned 
liability -driven cash flows.  Development :  
liability -driven CFs  
Plot 7: Development of liability -driven cash flows   
  
  
 -160 -140 -120 -100 -80 -60 -40 -20 -
 - 50 100 150 200 250 300
2021
2026
2031
2036
2041
2046
2051
2056
2061
2066
2071
2076
2081
2086
2091
2096
2101
2106
2111
2116
2121
Net Cash -flow [in MCHF]Cash -flow [in MCHF]
Contributions Benefits [incl. admin costs] Net Cash-flowWT/BFA/W/57 7 
 
- 40 - 
 
 
   145) The above plot shows that contributions (liability -driven cash -in) are  already in 
2021 (first projection year)  not sufficient anymore to finance the benefits and 
administrative costs (liability -driven cash -out). This means that the pension 
fund has recently started to consum e (rely on)  its investment income.  Discussion : 
1. Pivotal  
time point  
146) This is no news as the full actuarial valuation report at year -end 2019  has 
already presented similar findings.  Change to  
previous year  
147) The development of the l iability -driven cash flows depicted i n Plot 7 can be 
explained by the development of the insured population given in the following 
plot.  Insured  
population  
Plot 8: Development of the insured population   
  
  
148) The above plot shows that the number of plan participants has decreased a bit 
in the past and that the number of beneficiaries  has strongly increased . Hence, 
the share of beneficiaries has continuously risen in the past of WTOPP. As the 
population of beneficiaries at year -end 2020  is still quite small and young, the 
number of beneficiaries will further grow. In contrast to this, the number of plan 
participants is assumed to be constant at 700. Thus, the share of beneficiaries 
is clearly expected to increase further. This natural ly explains the reduction of 
the liability -driven net cash flow shown in Plot 7 over time.  Discussion  
149) It is interesting to further analyse the development of the insured population 
as this is the main driver of the pension fund. The following plot shows the 
expected development of the age structure over time.  Age structure  WT/BFA/W/57 7 
 
- 41 - 
 
 
 Plot 9: Develop ment of the age structure  at year -end 2045   
  
Expected age structure in 25 years   
150) As already stated above the population of the beneficiaries at year -end 2020  is 
still quite small and young. Over the next 25 years the existing beneficiaries will 
mainly get older (only a very small number of deaths are expected over this 
time horizon ) and there will continually emerge many new young beneficiaries 
particularly through (early) retirements. This can be seen very well by 
comparing the above plot with Plot 3.  Discussion  
151) Now we add the asset -driven investment income to the above discussed 
liability -driven cash flows. This completes the picture as the current level of 
assets, the future investment incomes and the future contributions need to 
finance the future benefits and administrative costs.  Adding 
investment 
income  
WT/BFA/W/57 7 
 
- 42 - 
 
 
  152) The following plot shows the development of the revenues (contributions and 
investment incomes) and the expenditures (benefits and administrative costs) 
over time. Furthermore, it contains the expected path of the assets.  Revenues  
and expenditures  
Plot 10: Development of revenues and expenditures   
   
  
153) The second pivotal time point occurs when the revenues (contributions and 
investment income) are not sufficient anymore to cover the expenditures 
(benefits and administrative costs). This is the point in time when the pension 
plans’ assets start to decreas e. As can be seen from the above plot this second 
pivotal time point occurs after 13  years  (in the year 2033) .  
Taking into account the investment income, the WTOPP currently displays a 
positive net cash flow and hence, the assets are expected to increase further  in 
the near future . However, after 13 years the projections show that the assets 
start to decrease.   Discussion:  
2. Pivotal  
time point  
154) This finding is very similar to the results in the last year’s actuarial report where 
the second pivotal time point occurs in the year 2032.  Change to  
previous year  
155) The third and final pivotal time point is when the assets are exhausted and there 
are no  assets left to pay the plan’s expenditures (benefits and administrative 
costs). On expectation this happens in the WTOPP after 41 years  (in the year 
2061) . Discussion:  
3. Pivotal  
time point  
156) This finding is very similar to the results in the last year’s  actuarial report where 
the third pivotal time point occurs in the year 206 0.  Change to  
previous year  
157) Clearly, the exhaustion of the assets after 41 years given in Plot 10 shows the 
necessity of sufficient reforms.  Reform necessary!  
WT/BFA/W/57 7 
 
- 43 - 
 
 
 3.4.2  Closed -Group Valuation  
158) The closed -group valuation method is thoroughly described in chapter 3.3.2.3 .  Method  
159) The following table contains the overfunding (underfunding) and the funding 
ratio in the closed -group valuation  at year -end 2020 . Furthermore, the results 
in the previous years are listed as well to allow for comparisons . Note that the 
closed -group valuation and hence, the funding ratio in this liquidation 
perspective h as not been calculated for every year.  Underfunding  
and funding ratio  
Table  20: Closed -group valuation : results   
  
Assets, liabilities and overfunding (underfunding) are stated in CHF millions.   
160) As explained in chapter 3.3.2  the closed -group valuation (liquidation 
perspective) i s not  the relevant perspective for the WTOPP. Hence, the results 
in the closed -group valuation are not  used to  steer the pension fund (thi s is 
done with the required  contribution rate  calculated in the open -group 
valuation ).  CGV: not the 
relevant 
perspective…  
161) Hence, it is no surprise that the Management Board of WTOPP has not set any 
acceptable margins within which the funding ratio calculated in the closed -
group can vary without any actions being taken.  …no acceptable 
margins  set 
162) Nevertheless, the results are still interesting, since they become absolutely 
relevant to the members in the (unlikely) case of dissolution of WTO.  …but still  
interesting  
163) It can be seen from Table  20 that the funding ratio can vary quite heavily from 
one year to the other. These fluctuations can be explained quite well by the 
financial assumptions (nominal interest rate and inflation rate)  used in the 
closed -group valuation given in  Table  17. Discussion :  
fluctuations  
Valuation 
DateAssets LiabilitiesOverfunding 
(underfunding) Funding 
Ratio
A B A-B A / B
YE 2010 339       683          -344                  50.0%
YE 2011 349       698          -349                  50.0%
YE 2012 397       802          -405                  50.0%
YE 2013 440       843          -403                  52.0%
YE 2014 487       1’182      -695                  41.0%
YE 2015 495       1’197      -702                  41.0%
YE 2016 536       1’458      -922                  37.0%
YE 2019 637       1’618      -981                  39.0%
YE 2020 666       1’558      -892                  42.7%WT/BFA/W/57 7 
 
- 44 - 
 
 
  
12 The precise amount clearly depends on the specific choices made in case of a dissolution of WTO. For instance , 
the General Council could decide to sell all liabilities to an insurance company . Clearly, the sell price is principally 
unknown today as it coul d only be determined by a costly procurement process . In the case that the General Council 
opts to further operate the discontinued fund the precise amount in particular depends on the choice of the 
investment strategy and the actual administrative costs  of operating a discontinued fund .  164) The funding ratio at y ear-end 2019  of 39.0% changes to a value of 42.7% by  
year-end 2020 . This can be explained by the increase in the real interest rate of 
-0.3% at year -end 2019  to a value of 0.0% by year -end 2020  which occurs do 
to the changed method described in chapter 3.3.2.3 .  Change to  
previous year  
165) The discussed c hange in  the consu lting actuary  of course also led to a chan ge 
in the used projection model . However, The replicat ion exercise carried out for 
the ye ar-end 2019  showed that  also the results in the closed -group valuation 
of these two projection models are very similar.  As of year -end 2019  the 
underfunding computed by Mercer (c -alm) amounts to 981 MCHF ( 959 MCHF ). 
The relative difference between these two underfundings is  2.2%  only. The 
funding ratio calculated by Mercer (c -alm) amounts to 39.0% (39.7%) and 
hence, the a bsolute difference  is 0.6%  only. The relative difference in the 
computed l iabilities  is even smaller, as it amounts to 1.3%  only.  Actuary change  
166) As shown in Table  20 the closed -group valuation  at the year -end 2020  leads to 
an underfunding of 892 MCHF. Th at is roughly12 the amount that the m ember s 
would need to f inance  in case of an immediate  dissolution  of WTO. The 
corresponding funding ratio is 42.7% .  Consequence  WT/BFA/W/57 7 
 
- 45 - 
 
 
 A1. Cash -Flow Projections  
167) The following table shows  the expected cash flow s of the WTOPP in the open -
group valuation over the next 1 00 years based on the assumptions set out in 
Section  3.2. Note that these cash flows were calculated with the current actual 
contribution rate of 23.7%.  OGV: Cash flows  
Table  21: Cash flows in the open -group valuation   
  
Year Contributions Investment income Benefits [incl. Admin costs]
2021 28.60              25.20                       33.80                                    
2022 28.30              25.90                       34.70                                    
2023 28.30              26.60                       37.80                                    
2024 28.30              27.20                       39.00                                    
2025 28.50              27.80                       41.60                                    
2026 28.60              28.30                       44.40                                    
2027 28.60              28.80                       46.70                                    
2028 28.70              29.10                       49.60                                    
2029 28.80              29.40                       52.70                                    
2030 28.80              29.50                       56.30                                    
2031 29.00              35.00                       59.20                                    
2032 29.20              35.20                       62.00                                    
2033 29.40              35.20                       64.80                                    
2034 29.70              35.10                       67.50                                    
2035 30.00              35.00                       70.20                                    
2036 30.30              34.70                       71.80                                    
2037 30.70              34.30                       74.20                                    
2038 31.20              33.90                       75.30                                    
2039 31.70              33.40                       76.90                                    
2040 32.30              32.90                       77.80                                    
2041 32.90              32.30                       78.90                                    
2042 33.40              31.70                       80.60                                    
2043 34.00              31.00                       81.10                                    
2044 34.50              30.20                       83.80                                    
2045 35.00              29.30                       85.20                                    
2046 35.40              28.40                       86.60                                    
2047 35.80              27.30                       89.20                                    
2048 36.20              26.10                       92.50                                    
2049 36.50              24.60                       95.30                                    
2050 36.80              23.10                       97.10                                    
2051 37.20              21.40                       98.90                                    
2052 37.60              19.50                       100.90                                  
2053 38.10              17.50                       102.10                                  
2054 38.60              15.40                       103.20                                  
2055 39.20              13.20                       104.40                                  
2056 39.70              10.80                       105.90                                  
2057 40.30              8.30                         106.90                                  
2058 40.90              5.70                         108.00                                  
2059 41.50              2.90                         109.40                                  
2060 42.20              -                          110.30                                  
2061 42.80              -3.10                       111.40                                  
2062 43.50              -6.30                       112.10                                  
2063 44.20              -9.70                       112.90                                  
2064 45.00              -13.20                     113.40                                  
2065 45.70              -16.90                     114.00                                  
2066 46.50              -20.70                     114.60                                  WT/BFA/W/57 7 
 
- 46 - 
 
 
   
Contributions, investment income and benefits (including administrative costs) in MCHF   
Year Contributions Investment income Benefits [incl. Admin costs]
2067 47.30              -24.70                     115.10                                  
2068 48.10              -28.90                     115.80                                  
2069 48.90              -33.20                     116.70                                  
2070 49.70              -37.80                     117.90                                  
2071 50.40              -42.50                     119.00                                  
2072 51.20              -47.60                     120.60                                  
2073 51.90              -52.80                     122.20                                  
2074 52.60              -58.40                     124.10                                  
2075 53.30              -64.30                     126.10                                  
2076 54.00              -70.50                     127.60                                  
2077 54.80              -77.00                     129.20                                  
2078 55.60              -83.80                     131.10                                  
2079 56.30              -91.00                     132.40                                  
2080 57.20              -98.50                     134.10                                  
2081 58.00              -106.40                   135.50                                  
2082 58.90              -114.70                   137.30                                  
2083 59.70              -123.40                   139.00                                  
2084 60.60              -132.60                   140.80                                  
2085 61.50              -142.20                   142.60                                  
2086 62.40              -152.20                   144.70                                  
2087 63.40              -162.80                   146.60                                  
2088 64.40              -173.90                   148.60                                  
2089 65.40              -185.60                   150.50                                  
2090 66.40              -197.80                   152.50                                  
2091 67.40              -210.60                   154.60                                  
2092 68.50              -224.00                   156.50                                  
2093 69.60              -238.00                   159.00                                  
2094 70.70              -252.80                   161.40                                  
2095 71.80              -268.30                   164.10                                  
2096 72.90              -284.60                   167.10                                  
2097 74.00              -301.60                   169.70                                  
2098 75.10              -319.60                   172.90                                  
2099 76.20              -338.40                   176.10                                  
2100 77.30              -358.20                   179.20                                  
2101 78.40              -378.90                   182.80                                  
2102 79.60              -400.70                   186.10                                  
2103 80.70              -423.60                   189.60                                  
2104 81.90              -447.60                   192.60                                  
2105 83.10              -472.80                   195.90                                  
2106 84.30              -499.20                   199.50                                  
2107 85.60              -526.90                   202.90                                  
2108 86.80              -555.90                   206.50                                  
2109 88.10              -586.40                   210.00                                  
2110 89.40              -618.30                   213.10                                  
2111 90.80              -651.70                   216.60                                  
2112 92.10              -686.80                   220.00                                  
2113 93.50              -723.50                   223.70                                  
2114 94.90              -761.90                   227.30                                  
2115 96.40              -802.20                   230.60                                  
2116 97.80              -844.40                   234.30                                  
2117 99.30              -888.60                   238.00                                  
2118 100.80            -934.80                   241.40                                  
2119 102.40            -983.30                   245.10                                  
2120 104.00            -1’034.00                 249.00                                  WT/BFA/W/57 7 
 
- 47 - 
 
 
 A2. Glossary  
168) Accrued benefits  include benefits incurred but not paid in the current valuation 
year. In the case of WTOPP  the accrued benefits are calculated with the current 
final average remuneration and the so far aquired years of service of a plan 
participant. The actual benefits to be paid out in the future however, will 
depend on the final average remuneration and the aquired years of service at 
the commencement of the benefit.  Accrued benefits  
169) Actuarial assumptions  basically are all parameters  needed for the actuarial 
projections . These include financial assumptions (i.e. discount rate, inflation 
rate, etc.) as well as demographic assumptions (i.e. growth of plan participant 
population, mortality rates, etc.) .  Actuarial  
assumptions  
170) Actuarial surplus or deficit  is the  actuarial position of the pension plan. This 
can be measured by the  difference between the  pension fund's assets and the  
liabilities  or by the comparison of the required contribution rate to the actual 
contribution rate . Actuarial surplus 
(deficit)  
171) Administrative costs  include the costs incurred in the general administration 
of the Pension Plan. T hey do not include the costs for the Plan's Secretariat, 
which are borne by the WTO (Article 5(f) of the Plan Regulations)  and also not 
the investment -related administrative costs, since these costs are already 
considered in the determination of the expect ed net portfolio return (discount 
rate). Administrative 
costs  
172) Best estimate  stands for expected value. What regards the assumptions this 
means that they are chosen as realistically as possible. The chance that reality 
will show a higher or a lower value than the best estimate assumption is fifty -
fifty.   Best estimate  
173) Cash -flow projections  include all future contributions, investment incomes, 
benefits and administrative costs. These future cash -flows are basically 
computed using the current insured population, the pension plan’s Regulations 
and various actuarial assumptions. They  are important for understanding the 
actuarial position of the pension plan.  Cash -flow  
projections  
174) Closed -group  valuation  determines the actuarial position of a pension fund  by 
immediately closing the fund which means that no future entrants are taken Closed -group  
valuation  WT/BFA/W/57 7 
 
- 48 - 
 
 
 into account. In the case of WTOPP this is done by modelling the accrued 
benefits of plan participants and beneficiaries only.   
175) Commutation  refers to r etirement benefits, early retirement benefits and 
deferred retirement benefits commuted at the request of the participant into a 
lump sum not exceeding 1/2 of the actuarial equivalent of the benefit or the 
amount of the participant's own contributions, whi chever is the larger.  Commutation  
176) Discount rate  is the interest rate used in  calculating the present value of future 
cash flows . In an actuarial context, the discount rate is often assumed to be the 
expected net return of the investment portfolio . Discount rate  
177) Final average renumeration  (FAR) is the remuneration during the last years or 
months of service that serves as a basis for  calculating any benefit payable 
under the WTOPP .  Final average  
remuneration  
178) Mortality rate  is the probability that a person of a given sex and age dies within 
one year.  Mortality rate  
179) Open -group valuation  determines the actuarial position of a p ension fund  by 
considering a given future time horizon where the fund is modelled as an open 
fund which means that future entrants are taken into account. After that time 
horizon the fund is closed (no further entrants) and the run -off is modelled.  Open -group  
valuation  
180)  In economics and finance,  a present value  (PV) stands for a  discounted value . 
Often not just a single future cash -flow is discounted to the date of valuation 
but an entire cash -flow stream . In this latter case, the present value is the 
sum of all discounted future cash -flows.  Present value  
181) Rate of return  is the relative change (measured as a percentage ; also called 
growth rate)  in the value of the portfolio over a specified period, taking into 
account both the investment income  (cash -flows like dividends)  and the change 
in the market value of the portfolio  (capital gain) . It is usually expressed as an 
annual rate. The nominal rate of return  is the  rate of  return before subtracting 
the inflation  rate (measured on the basis of the annual movement of the 
consumer price index in Switzerland). The real rate of return  is calculated by 
subtracting the inflation rate  from the nominal rate of return. The term gross 
means that the return is calculated before the deduction of investment -related 
costs while the term net refers to the return including all investment -related 
expenses. The target real rate of return  is the long -term real rate of return  
(typically, this is the same as the  real discount rate)  that the Pension Plan needs 
to achieve in order to meet its liabilities.  Rate of return  WT/BFA/W/57 7 
 
- 49 - 
 
 
   182) Regulations and Administrative Rules  refer to the Regulations and 
Administrative Rules adopted by the General Council on 16  October  1998, as 
amended by the General Council on 1  December  2005, on 28  July 2009, on 
26 October  2011, on 30  November  2015, on 7  December  2016 and on 26 July 
2017.  Regulations and 
Administrative 
Rules  WT/BFA/W/57 7 
 
- 50 - 
 
 
   
A3. Disclaimer  
183) This Report is confidential information and intended for the exclusive use of the 
WTOPP Management Board and the WTOPP  Secretariat. It may be shared with 
other WTO staff members , beneficiaries and WTO Members  on a need -to-know 
basis only, in the context of the work/services which are the subject of this 
Contract, and only with the explicit authorization of the Chair of th e WTOPP 
Management Board or the Secretary to the WTOPP in his/her absence. It was 
produced by c-alm AG  exclusively for use by the World Trade Organization 
Pension Plan for the specific purpose as well as in the specific environment and 
context indicated to  c-alm AG  at the time of its preparation. Its content is based 
on the information made available to c-alm AG  by the WTO Pension Plan or at 
its request. Its conclusions and recommendations are valid only for the specific 
purpose for which it was prepared, i n relation to the information made available 
to c-alm AG  and to the extent that the form in which this Report was issued by 
c-alm AG  was not subsequently altered, edited or modified.  Use 
184) Neither c-alm AG  nor any of its subsidiaries, affiliates, staff, agents or 
contractors may be held liable for the content of any part of this Report or for 
any action or omission any third party may be drawn to take on the basis of the 
content of this Report.  Liability  WT/BFA/W/57 7 
 
- 51 - 
 
 
  
 
13 Annex from page 5 2 to 89 provided by Mercer is available in pdf and English only.  A4. Draft Full Actuarial Valuation Report at YE201913