What will change for me in the new pension system?

You've probably read about it; the new pension system. To give you insight into exactly what that means for your situation, we have written this article with our pension expert André Meijvis. Below, we provide an overview of the most important agreements in the new pension law that will be introduced on 1 July 2023 and how they may affect your personal situation. Do you want to know how your pension is doing? Then contact André.

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Why a new pension law?

The current pension system is no longer a good fit for the flexible labor market and the aging society. The system promises certainty that is increasingly difficult to deliver. Despite good investment returns, partly as a result of the fall in interest rates in recent years, pension funds have barely been able to index pensions and sometimes even have to cut them. In many cases, the falling interest rate killed the funds.

The current system places a strong emphasis on security, with pension funds having to maintain large buffers, mainly due to the ageing population and the growing number of pensioners. Ensuring that security involves considerable costs, as safe but less profitable investments are required to build these buffers.

The new pension system is more in line with the needs and challenges of us as individuals and the pension funds that must deliver on their promises.

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An individual pension in the new pension system

Now, every employee, young or old, accrues the same pension in a pension fund. The employer pays an average contribution regardless of age for that pension plan. This is called the average premium. The actual premium for young people is actually much lower, but much higher for older people. As a result, the young people pay for retirement for the elderly. This system is disappearing. An employer still pays the same contribution for everyone, but as a result, young people are expected to accrue a higher pension in those years, and older people a lower pension. Agreements are being made to fill any pension deficit in the coming years. This may mean that your pension accrual is different than before.

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What happens to my accrued pension?

It depends on whether you accrue a pension with a pension fund or insurer or premium pension institution.

1. With Pension Funds

After all, pension funds must convert everything to the new system before 1 January 2028 if collective labor agreement parties decide this jointly, that's called entry. When transferring, the value of your accrued pension is calculated in the new system. This value and the contribution that is subsequently paid for you annually will ultimately lead to your pension, depending on the fund's return. The older you are, the greater the protection against a decline in your pension. The younger, the longer the horizon towards retirement and the more return you can get.

2. In the case of a pension scheme with an insurer or premium pension institution

There are around one million Dutch people who accrue a pension with an insurer or premium pension institution. These pensions will remain in place and will not be deducted. However, your employer will have to amend the pension scheme in consultation with the works council or staff representation; it is now expected by 1 January 2028 at the latest. In the end, you also have to agree to that yourself.

In the new pension plan, you may be given a choice whether or not to invest the pension you are about to receive. If you do not do that, you will receive a guaranteed benefit. If you do, it is called a variable benefit. It may be higher because you keep investing, but there is also a chance that that benefit will vary with the economy. You make that choice yourself at the latest on your retirement date.

If you now have a directly insured pension in the form of a fixed guaranteed benefit, the pension you have accrued will be retained until the scheme is amended. However, the scheme will have to be converted by your employer to the new scheme by 1 January 2028 at the latest.

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The state pension age is rising less rapidly

The retirement age was frozen at 66 years and 10 months in 2023. It will then rise to 67 years in 2024, which means that you may be eligible for your AOW pension later than expected. The new system links the state pension age to life expectancy, so a different age expectation also means a different retirement age. Do you want to know when you will receive an AOW pension. Do the check at the SVB.

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What risk profile do you choose for your pension?

A new pension plan with an equal contribution for everyone affects your pension. The final pension depends on the amount of the contributions made, the return, the development of life expectancy and the interest rate at the retirement date.

If your employer or the CAO partners opt for a Flexible Pension Plan, you can choose how the pension fund, insurer or premium pension institution should invest the contribution for you in the new pension system. You do this by choosing an investment profile (lifecycle). From 1 July 2023, these pension administrators will be obliged to provide you with much more guidance in this regard.

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What choices do I have on retirement date?

You will be presented with a large number of choices when you retire. Below are five choices that you can often make.

1. First more pension, then less, or vice versa

2. Variable benefit, i.e. investing after retirement or a fixed benefit

3. Withdraw a one-off amount of up to 10% of the total pension

4. Converting part of the partner's pension into a higher or earlier retirement pension, or vice versa

5. Retire earlier

Because you probably have more than one pension fund, it is wise to assess your situation with your advisor. This is how you optimize your pension benefits. How are you going to bridge the gap between your state pension and your first pension benefit? Do you know how much pension you will actually receive?

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The survivor's pension

With the survivor's pension, you care for your loved ones. The law distinguishes between two periods. The first period is the period until you retire. In the new law, the survivor's pension is a maximum of 50% of your salary. Exactly how high does your employer or the collective labor agreement parties set. If your employer determines this himself, he must ask for your consent if this differs from your current survivor's pension. After all, it may be less or, on the contrary, more than it is now.

You are entitled to a survivor's pension as long as you are employed and as soon as you retire. Are you stopping working for your employer? Then make sure you take out separate insurance to cover this risk. The second period is the period from your retirement.

In the new pension system, the amount depends on the accrued pension amount and the choices you make on retirement date.

Do you want to know how your pension is doing? Then contact André Meijvis now for personal advice. Get ready for a solid retirement future!

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