Since 2016 you have the option to purchase your life-long expiring pension benefits in the form of a variable pension based on investments.This is an alternative to the traditional guaranteed pension. If you opt for the variable pension, your pension benefits will be determined annually. The rest of your pension benefits remains invested. Your risk increases but also your chance of a higher pension. The upside of this is dat you will probably be able to keep up with.mark-ups. But your pension can also slightly decrease when returns on investment are disappointing.
Below some FAQ's.
Would a variable pension suit me?
A quick test.
- Am I willing to take more risk in exchange for a possible higher pension?
- Can I still get by if my pension is (slightly) less for a year?
- Do I still sleep well if my return on investment disappoint?
The more 'yes' the better a variable pension suits you.
Higher benefits from the start?
The new Act provides that insurers are permitted to offer gradually lower benefits for investment pensions.
Beneficiaries who choose this option receive significantly higher benefits at the outset than they would if receiving a guaranteed pension. This difference may run as high as 40%. For many people entering retirement, the benefits they receive when entitled to a fixed pension are too low.
The option of receiving gradually lower pension benefits is designed for this category. The insurer will gradually adjust the amount of the benefits over time, at which point it remains to be seen whether the payments received are actually declining. The underlying idea is that benefits can be maintained at the same level if returns on investment are high.
What is the amount of the benefits for a variabel pension?
Since a number of factors are unclear, we are unable to predict in advance how much you will receive from one year to the next. However, we can calculate for you how much you would receive in benefits during the first year if you were to opt for continued investment. The insurer will then also provide a forecast of the benefits after 10 years. We will be happy to review the various options available with you and to apply for no-obligation proposals.
Can I combine a variable and a fixed pension?
If you would like to take advantage of the opportunities provided by continued investment but do not want to invest all your pension capital, you have the option of combining these two products. You can then use a portion of the capital to purchase guaranteed benefits while using another portion to buy a variable pension. This gives you the security of a fixed pension while at the same time remaining eligible for higher payments. You choose when you purchase your pension. After retirement you can not make any changes.
Do I get to choose how my investments are allocated?
No: the Dutch insurers that currently offer investment pensions do not offer freedom of choice as far as the investment mix is concerned. However, there are significant differences between the various insurers providing these services. The ratio between shares (equity) and fixed-income securities, for example, varies depending on the insurance provider.
How are my investments allocated?
The insurers concerned have opted for what is known as a ‘lifecycle investment mix’. This means the composition of the portfolio and the associated risk levels will change during the investment term. We will be pleased to discuss your personal situation with you, so we can determine what products might best suit your needs.
The proposal you will subsequently receive will specify how your funds will be allocated.
What are the risks associated with a variable pension?
The amount of your benefits will be determined annually; this amount may be higher or lower than the previous year. There are three uncertain factors at play in this calculation, as listed below.
1. The amount of the available capital. This capital obviously fluctuates based on the return on investments.
2. Interest rates. If the interest rate is low when you purchase your benefit, this will result in a life-time lower pension. This is not the case if you choose a variable pension.
3. Life expectancy. If you opt for a fixed pension, the amount of your pension payments is fixed. The risk of people living increasingly longer is borne fully by the insurer. If you opt for continued investment, you will personally bear this risk, as the annual calculation of the pension payments is based on the life expectancy at that time. If general life expectancy is higher, you will receive a lower amount in benefits.
Can I purchase a high/low benefit?
It is not possible to combine a Dutch hoog/laag pensioen, where benefits are higher the first few years, with a variable benefit. This type of pension may exclusively be combined with a fixed, guaranteed pension.
What about my partner's pension?
You have the option to continue investing while retaining the security of a fixed surviving dependants’ pension for your partner. In this case, you only invest the capital for the retirement pension, and the amount of the partner’s pension is fixed from the start. Your partner may also opt for variable pension payments. Bear in mind that these choices must be made at an early stage.
Can I covert my partner's pension?
As with the fixed pension, the partner’s pension may be exchanged for a higher retirement pension if you have opted for an investment pension. If your partner is not interested in receiving a partner’s pension, he/she can waive this option and your retirement pension will be increased instead.
Questions or advice
If you have any questions or require advice on your personal situation, please call one of our experts at +31 (0)20 470 0920.
If you have no further questions and would like to receive a pension proposal, please request this through our website.