RESOLUTION OF 10th September 2010 concerning the PENSION FUND

The members of the GAC-EPA committee, after having taken note of the proposals by the Direction with a view to restoring the full funding of the Fund,

  • that the CERN pension scheme is a defined-benefit scheme,
  • that since 2005, the indexation of pensions has become a defined benefit,
  • that the payment by the Fund of pensions and their indexation is guaranteed by the Organization (see Article I 3.03 of the Rules of the Pension Fund), regardless of the financial situation of the Fund,
  • that during the existence of the Organization, Council, according to Article VII of the Convention, must define the Member State contributions, so as to allow the Organization to honour its financial obligations,
  • that two Council resolutions1 reaffirm that the Member States have the responsibility to ensure the uninterrupted payment of pensions until the extinguishment of the rights of the last beneficiary,
  • that by no means do the Rules of the Fund impose full funding, and hence, according to the legal framework recalled above, Council has no legal obligation to maintain the full funding of the Fund,
  • that the current structural deficit is to a large extent the consequence of decisions on staff policy taken by Council, fully aware of their effects on the equilibrium of the Fund (in particular those aiming to reduce the average age of the staff),
  • that on several occasions, Council decided not to adopt the measures to stabilize the Fund recommended by previous Managements, the Governing Board, and the Actuary, thus deliberately taking the risk of being obliged to finance these measures later, should it want to ensure this equilibrium,
  • that by adopting a set of measures to stabilize the Fund in 2005, and by approving the Levaux report in June 2007, Council decided, however, that the actuarial equilibrium of the Fund was to be restored, but did not want to carry alone the necessary financial burden, established by the actuarial model in question,
  • that according to the actuarial model of the Fund, based on realistic actuarial parameters and taking into account, in particular, the commitments linked to future indexation of pensions, the equilibrium of Fund should be restored within 30 years with the participation of the current and future members and of the beneficiaries,
  • that the Management proposes that the Organization contributes to restoring the equilibrium of the Fund with an annual injection of 60 million CHF from 2011 for 30 years, but that today this contribution is only ensured for a period of 5 years,
  • that, as far as pensioners and active staff are concerned, they are alone in making a large contribution2 to restore the Fund’s equilibrium,
  • that pensioners are subjected to an accumulative loss of purchasing power of their pensions of up to 8% (one month’s pension), by applying the pension indexation method, adopted 5 years ago,

and noting :

While this contribution of the pensioners has not yet produced all potential effects,
That the Management proposes:
  • modify the method, starting in 2011, to increase the possible accumulated loss of purchasing power of pensions from 8% to 10%.
  • To introduce a new application clause of the indexation method, which could even lead to an accumulative purchasing power loss of 12%
Decides unanimously :
  • to reject this proposal
  • to inform all pensioners with a view to taking action, if necessary.

1. In 1986 (CERN/1628) Council decided to constitute a foundation under Swiss law with a view to a succession of the Fund in the event of dissolution of CERN, to ensure the continuity of payments of pension rights to each beneficiary.
In 1996 (CERN/2165) Council decided that prior to the establishment of the foundation, the Fund would be balanced on the basis of realistic actuarial parameters, taking into account, in particular, the commitments linked to future pension indexations.

2. The last actuarial study showed in fact that, by 2036, pensioners will have contributed 13% to the increase in the funding ratio, due to the under-indexation of their pensions. Active staff will have contributed 10% to the increase by re-establishing the reduction factors in the event of retirement before the age of 65, while the Organization will have only contributed 2% with an increase of contributions. 

by GAC