Under the new pension system, pensions will move more in line with the economy. This has been raising a lot of questions, especially among people who are already retired. Will my pension go up and down every month in the new system? Could my pension suddenly be a lot lower? Siert Vos, manager Strategic Advice at Pensioenfonds PGB, will answer the most frequently asked questions about how pensions will be moving in line with the economy.
No, you'll receive the same amount year-round. As we do currently, we will determine your monthly pension payment once a year. This way, you know what to expect for the entire year.
The old rules have worked well for years, but this is changing. In recent years, we haven't always been able to increase pensions when the economy was doing well. This is because we are currently legally required to maintain large buffers. As a result, pensions often do not rise in step with the cost of living.
Under the new rules, however, we won't have to maintain such large buffers. Therefore, new pensions will move more in line with the economy. When the economy is strong, we will be able to increase pensions quicker. This also means, however, that if the economy slows down, pensions may be reduced.
The new pension system includes agreements aimed at minimising pension reductions. For example, we will invest with less risk as you approach retirement and when you’re retired. And we will spread out the investment results for pensioners over several years. Which agreements apply to you depends on the type of scheme your employer or industry has chosen.
Most people with a pension from Pensioenfonds PGB will switch to the Solidary Contribution Scheme. This scheme includes a reserve fund to prevent reductions in pensions in payment as much as possible.
Some employers have opted for a Flexible Contribution Scheme. This scheme does not include a reserve fund. It does, however, give you an additional choice before you retire. It lets you choose between a stable and a variable pension.
If you choose a stable pension, you will have more certainty about your pension payments. This pension may be increased or decreased slightly from one year to the next, always based on the same rules that currently also apply.
If you choose a variable pension, we will keep investing the money in your pension pot during your retirement. As a result, your pension will go up or down every year. To prevent your pension from suddenly decreasing significantly, we will spread out the investment results over several years.
A severe economic downturn will not mean that we will immediately reduce pensions in payment. After all, we spread out the investment results over several years. This way, we can compensate for economic downturns with economic upturns. Depending on your pension scheme, we will spread out the results over three years (Solidary Contribution Scheme) or five years (if you choose a variable pension under the Flexible Contribution Scheme).
Let's look at a sample calculation: We'll assume the Solidary Contribution Scheme. Under this scheme, we spread out investment results over three years.
Example
Let’s say we could increase pensions by 3% in year A. We then divide that increase over 3 years for pensioners. This means a 1% increase for year A. We divide the remainder (3 - 1 = 2%) by 3 again in year B. And so on.
In year B, pensions can increase by 4.5%. We then divide that over 3 years for pensioners. This gives us a 1.5% increase for year B, on top of the increase of 1/3 of the remainder from year A.
In year C, in an extreme scenario, there's a severe stock market crash, and we have to reduce pensions by 15%. We then divide that by 3 for pensioners. This gives us a 5% reduction per year.
| Year A | Year B | Year C |
| +1% | +0.67% (3-1)/3) | +0.44% ((3-1-0.67)/3) |
| +1.5% | +1% ((4.5-1.5)/3) | |
| -5% | ||
| +1% | +2.17% | -3.56% |
In year A, we are able to increase pensions by 1%. In year B, by 2.17%, and in year C, we would have to reduce pensions by 3.56%. To prevent this, we have a joint reserve fund that we can use to top up pensions to maintain their level.
We will fill the reserve fund with a maximum of 3% of all the money we have in reserve at the time of the transition to the new pension system. The percentage depends on our financial situation. With a coverage ratio of approximately 106%, we will be able to fill the reserve fund completely. Based on our current financial situation, we would be able to fill the reserve fund completely. This would allow us to prevent reductions over a longer period.
Once we've made the transition, we'll top up the reserve fund to a maximum of 5%. We will only do this if the economy is favourable, by setting aside a portion of the returns on our investments. This will ensure that the reserve fund remains full to absorb any setbacks.
Only during prolonged economic downturns, such as a deep recession, may the reserve fund get depleted. In such cases, we will continue to spread out any setbacks over several years.