Meeting of the Pension Fund Governing Board


Given the current state of the financial markets and the continuing uncertainty as to their future evolution, we begin by reiterating the introductory statement of the last report from the Pension Fund:

"The CERN pension scheme is based on the principle of defined benefits, so beneficiaries continue to receive the benefits to which they are entitled in accordance with the Rules of the Pension Fund. This means that pension entitlements under the Rules are not directly affected by the financial crisis and the current economic situation. However, the adjustment of pensions to the cost of living is not automatic and, under the method applied since 2006, must take into account the Fund’s financial position."

Meeting of the Pension Fund Governing Board (PFGB)

The PFGB held its ninth and tenth meetings on 1st December 2008 and 11 February 2009 respectively. At the ninth meeting, the Governing Board bade farewell to P. Lambert, who had been an expert member since November 2007 and a member of the Investment Committee since May 2004. The Chairman thanked him for his important contributions to the good operation of the Fund during his term of office, drawing special attention to his valuable input as a member of the Panel of External Experts and the Study Group on Pension Fund Governance chaired by P. Levaux, where he had unfailingly promoted best practice in the area with a view to making the Fund as transparent and efficient as possible. He received a warm round of applause from the members of the PFGB. In response, he stated that it had been an honour to work for such a prestigious and unique organisation as CERN. He observed that he was confident he was leaving the Fund in good hands with a new and improved mode of operation. In conclusion, he wished the Fund all the success it so richly deserved.

The PFGB then unanimously approved the document recommending the appointment of R. Balfe as successor to P. Lambert. R. Balfe was a member of the European Parliament from 1979 to 2004 and currently holds the position of Chairman of the European Parliament Members Pension Fund. He is a well-known figure in the pensions world and his interest in such matters means that his professional opinion is often sought by his peers in the field.

At the same meeting, the PFGB also decided to submit the code of conduct of the Pension Fund to the Council for approval. (Following the Council’s approval of the code at its session on 12 December 2008, it entered into force on 1st January 2009). The code, which applies to the personnel of the Fund, the members of its bodies and its commercial partners, is available on the Fund’s website (under the "Rules" heading).

The PFGB’s first meeting of 2009 encompassed a wide range of items, including, in particular, a report on the status of the work being conducted by the various PFGB working groups on issues where the Council is expecting results:

- Improvements to the internal control system will be one of the main items on the agenda of the next meeting in March of Working Group 1, whose remit covers the revision of Chapter I of the Pension Fund Rules and Regulations.

-- The work on funding issues by Working Group 2 is continuing. A preliminary report by the actuary on the important matter of full capitalisation and the funding strategy, taking account of acquired rights, is due to be submitted in the spring once the Fund’s accounting results as at the end of 2008 are available.

- Following the decisions by Working Group 4, which is entrusted with the organisation of the Fund’s administrative unit, the CERN Management will present a proposal to the Council in March with the aim of converting the Fund into a quasi-department, in line with the new governance principle envisioned by the Council. In addition, the selection board for the new General Manager of the Fund will be set up in early March.

The PFGB further took note of the new format of the Annual Report following CERN’s decision to apply the International Public Sector Accounting Standards (IPSAS), the adoption of which has a non-negligible impact on the way the technical balance is calculated and presented. In preparation for the information that the Fund will have to provide on a range of issues, the PFGB has asked the Administrator to draw up a plan for improving communication with the Fund’s members and beneficiaries. As part of this communication plan, the PFGB has decided to publish a streamlined version of the Annual Report.

The PFGB also approved the list of authorised signatures, as well as the proposal for a new IT system for handling data relating to the members and beneficiaries. The Fund will thus acquire a standard system available on the market through an IT firm specialising in the pensions field and which already has several Swiss pension funds among its clients. The parametering work will begin later this year and the system, which will benefit from logistics support from GS/AIS, should be operational by the beginning of 2011. The PFGB was further informed that the appeal lodged by a pensioner against the level of indexation of his pension had been rejected by the Administrative Tribunal of the International Labour Organization.

On the financial side, the PFGB took note of the position of the Fund’s assets as at 31 December 2008. With an estimated fall of 18% in 2008, the total assets have been badly hit by the global financial crisis. However, it should be noted that this figure corresponds to the average pension fund performance worldwide. It is, of course, plunging stock prices on the international markets and, to a certain extent, the depreciation of the respective currencies that account for the fall in the value of the portfolio.

However, thanks to its policy of international diversification, the CERN Pension Fund outperformed the average of the Swiss pension funds over the previous six years (2002-2007). It was penalised by that policy in 2008, whereas the Swiss pension funds, with their lower exposure to the international markets, were less affected by the crisis as the Swiss market performed better than the other markets (estimates by Crédit Suisse indicate losses of 14.9% for Swiss funds with assets in excess of a thousand million Swiss francs and 13.3% for Swiss funds as a whole).

In spite of these exceptional financial and economic circumstances, capitalised schemes will continue to offer an appropriate and effective long-term solution for building up the assets of an organisation’s provident scheme. It should be borne in mind that a significant portion of the pension benefits paid out has been generated by investments made several years ago. As underlined in another recent report from the Pension Fund, the Fund continues to believe in the merits of the market economy despite the current adversities. For it is only economic growth that can generate sufficient return on the assets built up by the active staff, either in the form of savings (capitalised schemes) or direct payments (budgetised schemes) to enable the Fund to honour its obligations to the pension beneficiaries. This is why the Fund must maintain a diversified portfolio of fixed and variable return assets, irrespective of the current difficult circumstances.

Finally, the PFGB noted with regret the deaths of the following beneficiaries:

Mr Janko JAMSEK (1926) on 21.11.08.

Mrs Elena BIANCHI (1943) 02.01.09.

Mr Henri FOUILLOUX (1936) 25.01.09.

Mr Pierre Jules EMERY (1927) 09.02.09.

Mr Leslie KING (1924) 15.02.09.

Mr Robert MUZELIER (1933) 15.02.09.

by HR Department