Prepared by Aon Hewitt Retirement and Investment

Annual Survey of Accounting Assumptions for Fiscal Year End 2016 – Switzerland

Aon Schweiz AG | Retirement and Investment 2

About this Material

This report presents the results of Aon Hewitt’s annual survey of accounting assumptions used for employee benefit plans at 2016 year-end for Switzerland. The results of this survey may be useful to companies when setting preliminary assumptions for 2017 year-end and budgets for 2018;

Aon Hewitt conducted this survey of fiscal 2016 year-end accounting assumptions by gathering assumptions used by our clients. Similar to last year, we have focused on economic and demographic assumptions that companies select under ASC 715, IAS 19 and other accounting standards with similar requirements for assumption setting (e.g. IPSAS);

As in previous surveys, we are only showing assumptions for companies with fiscal years ending on 31 December 2016. The following pages show the average assumption as of the end of 2015 and 2016. The averages are for post-employment plans as well as in-service benefits such as long service leave or jubilee awards;

However, while information about what others are doing can be helpful, the circumstances at one organization may differ in a material way from those at another. So, decisions should be made based on each organization’s relevant facts and circumstances and not just the results of a survey;

If you would like an update on current economic and demographic indices or the current status of changes in accounting standards, please contact your local Aon Hewitt consultant.

Aon Schweiz AG | Retirement and Investment 3

Agenda

Section 1 Economic Assumptions

Discount Rate Salary Increase Rate Expected Return on Plan Assets Pension Increase Rate Interest Credited to Account Balances Inflation Increase in Social Security Limits

Section 2 Demographic Assumptions

Mortality Disability Incidence Turnover Early Retirement Lump Sum Payments on Retirement Proportion of Members with Spouse’s / Partner’s Pension

Aon Schweiz AG | Retirement and Investment 4

Agenda Tracker

Section 1 Economic Assumptions

Discount Rate Salary Increase Rate Expected Return on Plan Assets Pension Increase Rate Interest Credited to Account Balances Inflation Increase in Social Security Limits

Section 2 Demographic Assumptions

Mortality Disability Incidence Turnover Early Retirement Lump Sum Payments on Retirement Proportion of Members with Spouse’s / Partner’s Pension

Aon Schweiz AG | Retirement and Investment 5

Discount Rate

10.5% 15.0%

67.3%

7.2% 0.0% 0.0% 0.0%

4.8% 4.8%

72.6%

15.1%

2.7%

0%

20%

40%

60%

80%

100%

< 0.30% 0.30% - 0.49% 0.50% - 0.69% 0.70% - 0.89% 0.90% - 1.09% >= 1.10%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 0.5% (153 responses) 2015 average = 0.8% (146 responses)

Average assumption decreased by around 0.3% from around 0.8% at 31.12.2015 to around 0.5% at 31.12.2016;

Average discount rates published by the Swiss Chamber of Pension Actuaries decreased from 0.45% – 0.94% at 31.12.2015 to 0.43% – 0.69% at 31.12.2016 for a duration of 10 – 20 years.

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Salary Increase Rate

6.7%

38.0% 42.7%

11.3%

1.3% 0.0% 6.3%

30.6%

40.3%

20.8%

1.4% 0.7% 0%

20%

40%

60%

80%

100%

< 1.00% 1.00% - 1.49% 1.50% - 1.99% 2.00% - 2.49% 2.50% - 2.99% >= 3.00%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 1.4% (150 responses) 2015 average = 1.5% (144 responses)

Average assumption decreased by around 0.1% from around 1.5% at 31.12.2015 to around 1.4% at 31.12.2016;

Around 81% / 71% assumed from 1.00% – 1.99% at 31.12.2016 / 31.12.2015 respectively;

Around 11% / 21% assumed from 2.00% – 2.49% at 31.12.2016 / 31.12.2015 respectively.

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Expected Return on Plan Assets

21.6% 13.5%

29.7%

13.5% 16.2%

5.4% 6.1%

24.2%

12.1% 18.2%

24.2%

15.2%

0%

20%

40%

60%

80%

100%

< 1.50% 1.50% - 1.99% 2.00% - 2.49% 2.50% - 2.99% 3.00% - 3.49% >= 3.50%

2017 2016

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2017 average = 2.2% (37 responses) 2016 average = 2.5% (33 responses)

Average assumption decreased by around 0.3% from around 2.5% for 2016 to around 2.2% for 2017;

Average expected return on plan assets decreased from around 1.9% / 3.0% for 2016 to around 1.4% / 2.6% for 2017 for fully insured / non-fully insured plans respectively.

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Pension Increase Rate

90.7%

4.7% 2.0% 2.0% 0.0% 0.7%

88.0%

4.9% 3.5% 0.7% 2.1% 0.7% 0%

20%

40%

60%

80%

100%

0.0% 0.01% - 0.24% 0.25% - 0.49% 0.50% - 0.74% 0.75% - 0.99% >= 1.00%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 0.0% (150 responses) 2015 average = 0.0% (142 responses)

Average pension increase rate assumed of around 0.0% remained unchanged at 31.12.2016 / 31.12.2015;

Herein we show an average rate for all plans which call for pension indexation, including those with an assumption of 0.0%.

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Interest Credited to Account Balances

19.0%

38.8%

24.5%

8.2% 4.1% 5.4% 4.4%

9.5%

35.0%

15.3% 21.2%

14.6%

0%

20%

40%

60%

80%

100%

< 1.00% 1.00% - 1.24% 1.25% - 1.49% 1.50% - 1.74% 1.75% - 1.99% >= 2.00%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 1.2% (147 responses) 2015 average = 1.5% (137 responses)

Average assumption decreased by around 0.3% from around 1.5% at 31.12.2015 to around 1.2% at 31.12.2016;

Around 63% / 45% assumed from 1.00% – 1.49% at 31.12.2016 / 31.12.2015 respectively;

Minimum BVG interest credited on account balances decreased by 0.25% from 1.25% for 2016 to 1.00% for 2017.

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Inflation

7.4% 3.4%

80.5%

5.4% 2.7% 0.7% 7.7%

0.7%

68.3%

16.9%

5.6% 0.7%

0%

20%

40%

60%

80%

100%

< 0.75% 0.75% - 0.99% 1.00% - 1.24% 1.25% - 1.49% 1.5% - 1.74% >= 1.75%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 1.0% (149 responses) 2015 average = 1.0% (142 responses)

Average inflation assumed of around 1.0% remained unchanged at 31.12.2016 / 31.12.2015;

Around 81% / 68% assumed from 1.00% – 1.24% at 31.12.2016 / 31.12.2015 respectively;

Around 5% / 17% assumed from 1.25% – 1.49% at 31.12.2016 / 31.12.2015 respectively.

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Increases in Social Security Limits

5.3% 4.0%

41.3% 43.3%

5.3% 0.7%

7.0% 0.7%

35.9% 43.0%

10.6% 2.8%

0%

20%

40%

60%

80%

100%

< 0.75% 0.75% - 0.99% 1.00% - 1.24% 1.25% - 1.49% 1.5% - 1.74% >= 1.75%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 1.1% (150 responses) 2015 average = 1.2% (142 responses)

Average assumption decreased by around 0.1% from around 1.2% at 31.12.2015 to around 1.1% at 31.12.2016;

Around 41% / 36% assumed from 1.00% – 1.24% at 31.12.2016 / 31.12.2015 respectively;

Around 49% / 54% assumed from 1.25% – 1.74% at 31.12.2016 / 31.12.2015 respectively.

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Agenda Tracker

Section 1 Economic Assumptions

Discount Rate Salary Increase Rate Expected Return on Plan Assets Pension Increase Rate Interest Credited to Account Balances Inflation Increase in Social Security Limits

Section 2 Demographic Assumptions

Mortality Disability Incidence Turnover Early Retirement Lump Sum Payments on Retirement Proportion of Members with Spouse’s / Partner’s Pension

Aon Schweiz AG | Retirement and Investment 13

Mortality

5.5%

0.0%

86.3%

0.0%

8.2%

8.5%

87.6%

0.7%

2.6%

0.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

BVG15(Generational)

BVG10(Generational)

BVG15 (Periodic)

BVG10 (Periodic)

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 (153 responses) 2015 (146 responses)

Around 88% / 86% assumed BVG 2015 / BVG 2010 generational mortality at 31.12.2016 / 31.12.2015 respectively;

Despite the predominance of BVG generational mortality, and the broad switch to the latest 2015 edition, there has certainly been more focus recently on the selection of this significant demographic assumption, with mortality improvement models coming under greater scrutiny and alternative approaches being developed and proposed in response.

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Disability Incidence

2.7%

0.0%

83.6%

0.0%

13.7%

2.0%

88.9%

1.3%

7.2%

0.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

BVG15

BVG10

BVG15 Adjusted

BVG10 Adjusted

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 (153 responses) 2015 (146 responses)

Around 89% / 84% assumed BVG 2015 / BVG 2010 disability incidence at 31.12.2016 / 31.12.2015 respectively;

Around 7% / 14% assumed adjusted BVG 2015 / BVG 2010 disability incidence at 31.12.2016 / 31.12.2015 respectively.

Aon Schweiz AG | Retirement and Investment 15

Turnover

22.9%

0.0%

55.6%

0.0%

21.5%

13.7%

62.7%

1.3%

21.6%

0.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

BVG15

BVG10

BVG15 Adjusted

BVG10 Adjusted

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 (153 responses) 2015 (144 responses)

Around 63% / 56% assumed BVG 2015 / BVG 2010 turnover at 31.12.2016 / 31.12.2015 respectively;

Around 22% / 22% assumed adjusted BVG 2015 / BVG 2010 turnover at 31.12.2016 / 31.12.2015 respectively.

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Early Retirement

49.3%

50.7%

54.2%

45.8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No

Yes

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 (153 responses) 2015 (146 responses)

Around 46% / 51% assumed early retirements at 31.12.2016 / 31.12.2015 respectively;

Around 54% / 49% assumed no early retirements at 31.12.2016 / 31.12.2015 respectively.

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Lump Sum Payments on Retirement

13.4% 11.4%

51.7%

11.4%

2.0% 10.1%

16.3% 13.5%

46.1%

12.8%

0.7%

10.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

< 10% 10% - 19% 20% - 39% 40% - 59% 60% - 79% >=80%

2016 2015

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 30% (149 responses) 2015 average = 30% (141 responses)

Average lump sum payments on retirement assumed of around 30% remained unchanged at 31.12.2016 / 31.12.2015;

Around 52% / 46% assumed from 20% – 39% at 31.12.2016 / 31.12.2015 respectively;

Around 25% / 30% assumed less than 20% at 31.12.2016 / 31.12.2015 respectively.

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Proportion of Members with Spouse's / Partner's Pension

0.0% 0.7% 2.0%

47.7% 49.7%

0.0% 0.0% 1.4% 2.8%

27.3%

67.8%

0.7%

39.7%

16.6%

2.6% 1.3%

39.7%

0.0%

19.0% 22.5%

6.3% 4.2%

47.9%

0.0% 0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

< 50% 50% - 59% 60% - 69% 70% - 79% 80% - 89% >= 90%

2016 males2015 males2016 females2015 females

Source: Internal Aon Hewitt Survey for 2016 Fiscal Year End

2016 average = 77% males / 60% females (151 responses) 2015 average = 76% males / 64% females (143 responses)

For females, average assumption decreased by around 4% from around 64% at 31.12.2015 to around 60% at 31.12.2016;

For males, average assumption increased by around 1% from around 76% at 31.12.2015 to around 77% at 31.12.2016;

About 28% did not use single rates but instead elected to use the complete BVG 2015 table at 31.12.2016. For those, the proportions used to prepare the 2016 chart and averages above were 79% at age 65 for males / 43% at age 64 for females.

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Contact List

Iain Richardson Senior Actuarial Consultant Aon Schweiz AG Retirement and Investment +41 (0)58 266 88 17 iain.richardson@aonhewitt.com

Flavio Müller Actuarial Consultant Aon Schweiz AG Retirement and Investment +41 (0)58 266 88 34 flavio.mueller@aonhewitt.com

Rainer Petretti Actuarial Consultant Aon Schweiz AG Retirement and Investment +41 (0)58 266 88 14 rainer.petretti@aonhewitt.com

Aon Schweiz AG | Retirement and Investment 20

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