Will there also be options to exchange retirement pension and partner’s pension?
The options to increase the retirement pension by exchanging the partner’s pension and vice versa, will
remain even after the system transition.
Will the partner’s pension also change for people who are already retired?
f you have already retired by the transition date, the partner’s pension will, in principle, not change. It
can, however, be the case that the already commenced pensions will be increased at the time of the
transition if the funding level is high enough. In that case, co-insured partner’s pensions will also share in
that increase.
What will change in the partner’s pension?
The following will change as a result of the Future Pensions Act:
In the current scheme you accrue part of the partner’s pension for every year you are employed. Should
you die before you reach retirement age, this accrued partner’s pension will be paid out to the surviving
partner. This is supplemented with the partner’s pension that you could have accrued had you
continued to work until your pension age. You have not yet accrued this future part of the partner’s
pension but this is insured on a risk basis. This means that no accrual will take place for that part of the
partner’s pension. The additional supplement to which your partner is entitled is covered from the risk
premiums in the event of your death.
In the new scheme, the level of the partner’s pension will no longer be determined by the number of
years that you accrue your pension. A percentage of the pensionable salary will be insured for everyone,
whether you’ve been employed for one day or forty years. This percentage amounts to 35% but 30% has
been agreed for the initial years. This is explained below. The new Pensions Act states that current
accrued entitlements to the partner’s pension will be retained for partner’s pension also after the
transition to the new system. In effect, this means double payments will be made under the new
system. The partner of someone who dies prior to their pension age will be paid both the current
accrued entitlement to a partner’s pension as well as the new cover. As everyone at Pensioenfonds PDN
accrues a partner’s pension, the total partner’s pension in the initial years after the transition to the new
system will be relatively high, which is why the social partners have agreed that the cover in the new
system will start at 30%. After that, the share of the former accrued entitlements will reduce and the
cover will increase to the intended 35%. The point at which this will take place is not yet known.
The partner’s pension in the event of death prior to the retirement date will be covered on a risk basis.
The partner will be entitled to a partner’s pension benefit and the children will be entitled to an
orphan’s pension benefit under certain conditions and only if the member dies during membership, or
during a period of unemployment benefit
Members can also insure a partner’s pension after retirement should they wish to do so. As a fund
member, you accrue pension capital. If you have no partner on the retirement date, this capital will be
converted on your retirement date into a retirement pension and a partner’s pension that amounts to
70% of the retirement pension. Members can opt to deviate from this 70% or they can also decide not
to insure for a partner’s pension at all.
Finally, the definition of ‘partner’ will change. In the current legislation and regulations, the definition of
partner is: a) the spouse; b) the registered partner; or c) the partner as defined in the Pension
Agreement. This latter category gives the social partners the freedom to determine whether and under
what conditions they would like unmarried cohabiting partners to be eligible for a partner’s pension.
This will result in very diverse interpretations of the definition of partner per pension scheme.
The Future Pensions Act introduces the following uniform definition of partner:
The criterion for eligibility for a partner’s pension as an unmarried cohabiting partner without a
notarised cohabitation contract is running a joint household.
What is included in the surviving dependent’s pension?
The surviving dependent’s pension comprises the following:
What is agreed about the new orphan’s pension?
Like the partner’s pension, the orphan’s pension also no longer depends on the number of years in
service. 20% of the deceased’s salary is insured per orphan. The total amount in orphan’s pension is
limited to three orphans, so up to 3 x 20% = 60%. If there more than three orphans, this 60% will be
shared by the number of orphans.
Why is a solidarity reserve being introduced?
Maintaining a solidarity reserve makes it easier to optimise the scheme to ensure pension benefit
stability and to manage the expected pension outcome. Financial and economic risks can be shared
across generations by supplementing the solidarity reserve in times of economic prosperity and using it
when things are not going so well.
Who does the solidarity reserve belong to?
In principle, the solidarity reserve is formed by all members and all members can benefit from this. If
you opt for a value transfer to another pension provider, you will not receive part of the solidarity
reserve. You will join the scheme that applies at the new administrator, which may also have a solidarity
reserve (depending on the scheme’s chosen interpretation). However, you do not need to transfer your
pension. You can also leave this in the fund so that the Pensioenfonds PDN solidarity reserve still
applies.
What risks are covered by the solidarity reserve?
The social partners would like to use the solidarity reserve for the following purposes:
When will the personal pension capital be converted into a pension?
When you retire, the capital will be converted into a pension benefit.
If you are almost about to retire, does it matter if you wait to retire after the transition or retire before it?
In principle, it makes no difference whether you choose to retire before or after the transition date.
How will the transition to the new pension system change my pension outlook?
The transition plan will be posted on the Pensioenfonds PDN website in mid-October. This will show
how the expected pensions in the new system compare with those in the current system. This will be
calculated for various ages and different member categories.
How does the fund prevent exposure to major investment risks just prior to retirement?
The pension fund will set up the investment policy in such a way that no major surprises can occur in the
period prior to retirement.
How does the capital I will receive compare with what I see on my UPS now?
On the transition date, your accrued entitlements will be converted into capital. The conversion is cost-neutral.
How high will the pension contribution be after the transition date?
The social partners have agreed that the contribution will not change during the transfer to the new
pension system. This will, therefore, remain at 24.17% of the pensionable salary. After the transition
date, the contribution will, however, be expressed as a percentage of the pension base. The pension
base is the part of the salary over which pension is accrued. As part of your income after retirement will
come from the state pension, you do not need to accrue pension over your entire salary. If the
contribution is expressed over the pension base, this will amount to 30%.
Can you decide yourself how your contributions are invested?
It is not possible to determine yourself how much risk you want to take in investing your contributions
and pension capital. The pension fund is responsible for the investment policy. However, the fund will
periodically conduct a so-called risk-preference survey. The outcomes of this survey will clarify what risk
members find acceptable. The investment policy will be developed on a collective basis.
Can the contribution differ per employer?
All employers currently pay the same contribution to Pensioenfonds PDN. We are unable to state right
now whether this may change in the future.
Will we receive compensation for missed indexations in the transition to the new system?
If the funding level exceeds 109% at the time of the transition, the excess will be allocated to the
personal pension capital. This allocation takes place without changes to the percentage i.e. if there is a
10% surplus, personal pension capital or commenced pensions will increase by 10% for everyone. This
can be viewed as extra indexation. The transition plan will cover this in more detail.
Why are pensions expected to improve under the new system?
Smaller buffers can be maintained under the new system. This means it will be possible to increase the
pension rights and entitlements earlier, as the full buffer does not have to be accrued first. Increases are
no longer capped by the maximum of price or wage inflation, as is currently the case. The downside is
that this does make pensions slightly riskier, but this can be mitigated by spreading the shocks and by
targeted use of the solidarity reserve. Calculations have shown that the transition for deferred members
and pensioners will work out better than not participating in the transition.
What is meant by the transition?
The choice for a new pension scheme applies in principle to the accrual of new pension entitlements. By
transition we mean that the existing pension entitlements and rights will be moved to the new pension
scheme.
What is meant by the distribution period?
If the funding level exceeds 109% at the time of transition, the excess will be added to the personal
pension capital. If the system transition were not to take place, the buffer would have been used for
future indexation and to absorb the risks in times of economic downturn. The buffer would then be used
very gradually over the years to come.
In distributing the buffer at time of transition, legislation offers the space to take into account the
original idea that the buffer would only become available gradually. The distribution period has been
introduced for this. The legal default for the distribution period is 10 years. If this were to be applied,
calculations would then be made regarding which share of the buffer a person would receive if this was
paid out gradually over 10 years. In that calculation, life expectancy plays an important role. The oldest
group of members would then be awarded less than the youngest group. The calculated amounts will,
however, be made available in one go at the time of transition.
For various reasons, the social partners opted for a one-year distribution period (see the transition plan
for further details).
How important is the funding level at the moment of transition?
A minimum desired funding level of 109% has been set. At this level, we can make transition to the new
system as envisaged by social partners (this is described in the transition plan). At higher funding levels,
the transition becomes more profitable as funds become available to increase individual pension capital.
The transition is also possible with a funding level between 107% and 109% but the solidarity reserve
cannot be fully supplemented. This further supplementation will then need to take place in the years
after the transition.
If the funding level is below 107% at the time of transition, the social partners aim to reassess the
situation and make additional agreements. The same applies to an extremely high funding level, which
the social partners have set at being higher than 130%
Why and for whom is compensation required?
Groups of members may be disadvantaged by the cancellation of the flat rate system. They paid
contributions in their younger years that contributed to accrual for the older generation on the
assumption that this system would still apply to them when they themselves became older. However,
from the moment of the transition, members will start paying contributions earmarked for their own
personal pension capital and the solidarity of the flat rate contribution will cease. For this reason, the
advent of this system is disadvantageous to older members. The Pensions Act (Pensioenwet) offers
space to compensate the affected members for this. The disadvantage relates to future pension accrual,
which is why compensation is only targeted towards members and members with non-contributory
pension accrual due to disability. Deferred members are excluded from compensation by law as they will
not have any future pension accrual within the fund.
How will the compensation take place?
It is determined for all age groups how much pension accrual would still take place from the transition
date based on the current accrual rate of 1.738% (retirement pension at the current pension age 67).
The accrual is also determined assuming the new age-independent contribution. This calculation was
made based on the interest rate curve at the end of 2023. The difference in value between both
outlooks is determined by age. If the current outlook is higher than the new outlook, this difference will
be expressed as a percentage of the pension base. This amount will be added to the personal pension
capital of those members who are eligible for compensation. This avoids participants being tied to
transition rights for years. When changing pension providers (as a possible consequence of job changes),
this approach can be advantageous if the new pension provider has a long-term compensation
trajectory (maximum 10 years). On the other hand, it does mean that members who join shortly after
the transition will no longer receive compensation.
How will the compensation be paid?
The Act offers various options to finance the compensation. The fund’s assets can be used by
temporarily paying extra contributions or making payments outside the pension sphere. The social
partners have agreed to finance the compensation from fund capital at the time of transition if the
funding level is high enough. At that point, the personal pension capital will receive a one-off
supplement. This will cost, in total, around 2% of the funding level.
Can pensions keep up with inflation in the new system?
In principle the pensions are variable and will be adjusted based on the achieved investment result. By
definition, this need not match annual price trends (investment returns and price trends will largely be
out of sync). The social partners are aiming for a situation in which pensions are expected to keep up
with average price inflation in the long term. As this level cannot be guaranteed, the social partners have
set a lower limit of at least 70% of inflation. This means that if the long-term expectation as calculated
by Pensioenfonds PDN is that the 70% limit will not be achieved, the social partners will need to
renegotiate achieving the indexation ambition.