The pension system is changing

Under the old pension system, contributions from all employees were paid into one large collective fund. Due to fixed rules, older employees built up more pension from these contributions than younger employees. Younger employees therefore contributed relatively more towards the pensions of older generations. In this article, we focus mainly on employees who build up pension benefits through a pension fund. Further on, you can read what the transition means if you have already retired.

Under the new pension system, this changes. The fixed rules will disappear. The contributions you pay will be linked more closely to you personally. Everyone will build up pension according to the same rules, based on the contributions paid and the investment returns achieved on those contributions.

For many people, especially those aged between 40 and 55, this transition may be disadvantageous. They have already built up a large part of their pension under the old system and have less time to recover from any setbacks. As a result, their pension may be lower than previously expected. To reduce this difference, compensation arrangements have been agreed.

Compensation is intended to help you during the transition to the new system. Employers and pension funds calculate how much less pension you may build up as a result of the transition. Based on this, you may receive compensation.

Compensation can be provided in two ways:

• an additional contribution to your pension; or
• a one-off payment on the transition date.

This differs by employer and pension fund.

When moving to the new pension system, trade unions and employers make agreements about compensation together with the pension funds.

Dozens of pension funds have already switched to the new system. Members of these funds have received compensation where applicable.

Your compensation depends on your age, salary and the financial position of your pension fund. The number of hours you work at the time of the transition is also taken into account.

• If you reduce your working hours, this may affect your compensation. 
• If you increase your working hours, your compensation may be higher. 

For example, if you reduce your working week from 36 hours to 24 hours before the transition, your compensation may also decrease significantly. This could mean you receive thousands of euros less in compensation. Ask your pension provider when your fund will switch and what this means for you.

If you increase your working hours after the transition, this will usually no longer count towards additional compensation.

Are you still building up pension benefits? If so, you can take the following steps:

• Review your current pension and your expectations for the future. 
• Use tools such as Mijnpensioenoverzicht.nl. 
• Would you like to build up additional pension alongside your employer pension? You can save and/or invest flexibly for additional retirement income with an ABN AMRO pension account. 

Start today. The sooner you gain insight into your situation, the better prepared you will be. Contact your pension provider. This can help prevent you from receiving less compensation than you may be entitled to.

Are you leaving your employer, starting a new job or becoming self-employed around the time of the transition to the new pension system? If so, you may miss out on pension compensation. This mainly happens if you leave your employer before your current pension fund switches to the new system, or if you move to an employer that does not offer a comparable arrangement. Because compensation is intended for pension benefits that are still being built up during the transition, it may no longer apply once you leave. You may be able to avoid this by continuing to build up pension voluntarily with your previous fund, or by asking your new employer what compensation arrangements they offer.

If you start building up pension with a new employer or a pension fund that has not yet switched to the new system, while you were also building up pension with your previous employer or fund, you may receive compensation twice, or no compensation at all. This depends, among other things, on the funding ratio of the pension fund.

If you have already retired, you will usually no longer be building up an employer pension. Compensation for lower future pension accrual is therefore generally not intended for you. However, your current pension payments will transfer to the new pension system.

You will continue to receive a pension for the rest of your life. Following the transition, the amount you receive may vary more in line with investment performance. If investment performance is strong, your pension may increase sooner. If investment performance is disappointing, your pension may also decrease. Pension funds may use reserves to limit reductions as much as possible.

What the transition means for you specifically depends on your pension fund. Your pension provider will inform you about the expected impact on your monthly pension payments. Therefore, review the personal information from your pension provider and check your current pension details at Mijnpensioenoverzicht.nl.

This article provides general information. The exact rules differ between pension funds. Always check your personal situation with your pension provider.