After a long period of consultation, a new pension agreement has been reached. I enjoy working with pensions on a daily basis. Solving a complicated pension issue makes me happy. But hey, that’s me. I understand many of you will find it boring and complicated. However, I do want to give it a shot and tell you a bit about the outlines of the new pension agreement and the implications this has for you. It will take you approximately five minutes to read. Which is nothing compared to the time you want to spend enjoying your pension. Here we go:
Many employers have a pension with a montly payment which is definite. You and your employer pay a lot of money for this every month. This money is paid into a collective savings account.
Due to the low (actuarial) interest rate and disappointing results on investments, it is questionable if the set pension pay out, or your monthly salary, can be paid. The technical terms are coverage and stamping. I could come up with more than 100 other terms, but I won’t. I was going to keep it simple for you!
The starting point of the new pension agreement is that pension payments are no longer definite. The payments will depend on the amount invested and the actual return on investement. If the results are good, your pension will be higher. If the results are disappointing, your pension will be lower than expected.
In short, the size of your monthly pension is no longer set in stone. Which used to be the case. It now includes an element of change. At your own risk.
The switch from Now to New needs to be carried out between 1st January 2022 and 1st January 2026.
Your employer needs to draft a proposal stipulating how the transfer from Now to New will take place. The starting point is that your current pensions (money saved for your monthly salary) will be transferred by default to New. This means that your fixed income all of a sudden is no longer fixed. The current Now entitlements can only remain untouched in exceptional circumstances
You will be informed of the difference between your old and your new pension. Depending on the outcome, it will be decided if and how you will be compensated.
The ‘boring’ pension agreement is still fresh, the impact will become clearer in the coming period. It is certain that a lot will change, all of which needs to be legislated. If any adjustements will be made during this process is, naturally, not clear at present.
A lot of information will be provided on the transition and consequences for you and your employer. I expect this communication to only make sense to professional devotees like me, and will be extremely boring and complicated for other people.
Receiving proper and honest information is of great importance. Make sure you aware of the implications. Make sure you are well informed.
I am ready to inform you in an easy to understand manner by mail, app, telephone, video or or in real life.
Sander van Haren
Director & consultant
Vixx Pensions and Financial Planning.