FAQ

  Surviving dependent's pension

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:

  • the method of determining the level of the partner’s pension and
  • the method of covering the risk of death prior to the retirement date and
  • a uniform definition of partner is being introduced.

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:

  • spouse;
  • registered partner; or
  • partner as defined in the Pension Agreement, this being the adult who runs a joint household 
    with the employee or former employee, unless this concerns a first-degree blood relative, a 
    second-degree direct line blood relative, an adult stepchild or adult former foster child.

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:

  • A partner’s pension in the event of death prior to the retirement date;
  • A partner’s pension in the event of death after to the retirement date; and
  • An orphan’s pension.

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.

  Solidarity reserve

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:

  • If already commenced pensions are at risk of being reduced in a particular year, the solidarity 
    reserve can be used to make up the shortfall in that year. The aim is to achieve nominal stability.
  • If the annual excess return falls below -15%, the negative return below this -15% will 
    supplemented from the solidarity reserve so that the return remains at -15%.
  • Protection for longevity risk, which prevents the pension pot from being depleted because 
    someone lives longer than previously anticipated.
  Capital accrual for your pension

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. 

  Pension contribution

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.

  Missed indexation

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.

  Transition of existing entitlements and pension rights

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%

  Compensation

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.

  Purchasing power

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.