A translation of this article follows.
After a well-received first season of Kids & Cash, we are starting a new video series in which children talk frankly about more than just money: Kids &…
What if children could be the boss of the Netherlands for one day? They would want to ‘keep the world a bit clean’, ‘make everything free of charge’ and ‘abolish Corona’. In this edition of Kids & Politics we see that political interests are already kindled at an early age. Children know Mark Rutte is the one calling the shots, but ‘the King tells him what he needs to do’ and ‘Minister Santa Claus’ also helps out. And the treasury chest with all of its pots of money? That is spent on ‘teachers who want more money’, ‘a climbing frame’ and ‘building a school’.
“You work in the pension sector? Wow, exciting...” Plenty of preconceived notions about working for a pension fund or administrator. Perhaps not all justified, as shown by a series of portraits about people who work there on a daily basis. People like Senior pension spokesman Fabian Schumans. “Working on your pension is making choices for your own happiness and that is never boring.”
What does a Senior pension spokesman do for an administrator like APG?
“I have individual conversations with participants that are in complex pension situations. I create and lead workshops and presentations for participants and courses for employees and pension ambassadors. The objective is to increase people’s knowledge about pensions and to enable employers to pick up their role.”
You are really out in the field, speaking directly with the pension participant. What is that like?
“As a pension administrator, APG has contact with the participant on several levels. For example, through our client contact center where every kind of question is asked. The conversations I have are about more complex situations, such as the threat of disability, an escalating labor dispute, or people who are terminally ill.”
Conversations in which emotions probably run high.
“I always reassure people at the beginning of a conversation. They talk about their pension so rarely that it often makes them nervous, insecure. And for people who might lose money, yes, some emotions come into play. And I give them room for that. It can also get pretty intense, people sometimes start cursing, they threaten to drive their car through our wall, or they might feel devastated, because they don’t know what to do.”
How do you deal with that?
“To tell you the truth, I’d rather deal with those emotions and questions than with people who stay flat. I have often heard terms like pension crooks and pension mafia. But that’s okay. That is when questions arise and I can go into it in-depth, answer questions and really deal with a situation.”
What qualities do you need for a job like yours?
“You can’t get blown away by anger and you need to approach people without prejudice. I always talk to people at eye level and sense what is going on when I am standing in front of a group.”
It is kind of a luxury to have a conversation with a pension spokesman. When exactly do you take action?
“There are twelve of us pension spokesmen for ABP and for 1.3 million active pension participants that is not very many, so we don’t promote it. We have Relationship managers at APG who will bring us in for employers at the right time.”
You talk about pensions all day long; how do you keep it up?
“Oh, that’s not very difficult. Pensions are not boring at all. They are constantly in the news and they are constantly developing. What I’m doing now is really my passion, so I can keep talking about it for a long time.”
Passion and pension in one sentence: that something you will have to explain.
“If I can solve misunderstandings, that makes me smile. That also happens when I can help people get a grip on making the right choices or when I hear that after they talked to me they realized they are in such a good position that they can retire sooner. And that inspires me to do my best for the participant every single day.”
I don’t talk to a bus driver for hours about how the coverage ratio is calculated
How do you hold the attention of your audience on the lesson?
“By keeping it light. With a joke and a wink. I think that helps them to absorb the content better too. As opposed to people who make pensions unnecessarily complicated and act almost mysterious about it. Then people stop listening. I look at the people I talk to. What is relevant to him or her? That is what I focus on. So, I don’t talk to a bus driver for hours about how the coverage ratio is calculated. I ask people how they want to live in the future and have a conversation with them about how that can be achieved. Pension is about a phase in life where you can do fun things and enjoy your freedom. What could be better than spending your time on that?”
What is the message you give people?
“Take charge of the end of your career. Don’t choose standard options because you don’t want to look at it in-depth, but look at your own desires and your own situation. Working on your pension is making choices for your own happiness and that is never boring.”
Was this what you dreamed of when you were a little boy?
“Not really. I studied criminal law and criminology in university, thought I might want to join the police force and looked for a job in that world and outside of Limburg. But before I even started in that sector, I ended up at the client contact center at APG as a temp. After that I moved up the ranks quite quickly. I accumulated knowledge about pension, spent some time in sales and then landed in my current team. I love the contact with the participant and I find APG so interesting as an employer that I’m not thinking of going anywhere else anytime soon. And in terms of the new pension contract, I actually feel I am very much needed here right now.”
Wouldn’t you like to still pursue the dreams of your youth?
“I want to be among people; that client contact is very valuable to me. I had a staff position before, but that didn’t suit me at the time. I prefer to be out in the field. And that is exciting for me, because I don’t want to start doing anything on autopilot.”
Early retirement thanks to the Bitcoin. Someone in my circle managed to do just that. In particular the price explosion as of last summer was a major contributor. Would this be an idea for pension funds? APG has received some media questions on the topic over the past few weeks. This resulted in articles, concluding that major investors still hesitate.
Please pay attention to the word ‘still’. Is it just a matter of time? I will get back to you on that one. Let's first take a look at the investment approach of pension funds. The goal is to provide participants with a good pension. An important question is the amount of investment risk you are willing to take. Avoiding all risks leads to a pension that's quite certain, but also quite low. Accepting more risk leads to higher pensions on average, but also to a greater 'variety’ surrounding it. The ultimate investment policy has to match the needs of the participants.
Are Bitcoins a good fit? The price movements are rather substantial. This has very likely disturbed the night's rest of the friend of a friend mentioned above. The price decreased by 70% or more three times in the past ten years. It eventually worked out well for her in euros and she can now catch some extra hours of sleep. My point is that you have to relate the phenomenal price increase to the huge volatility of the prices. When risk-adjusted, the reward over the past ten years is similar to the reward you get from a (50/50) portfolio composed of global shares and bonds (for the wonks: the Sharpe ratio is the same).
But it's all about the future. Do Bitcoins provide added value to a portfolio? In order to establish that, it is important to first determine the return expectations in several ‘weather conditions'. What is the so-called ‘investment case’? Where does the return come from? Just take shares or real estate for instance. Those sectors have recurring revenues - dividends and rental income - that move along with the economy or inflation. That's something you can count on.
To what extent the price is still able to rise is very hard to say
That doesn't apply to Bitcoins. There is no cash flow. It is therefore impossible to determine ‘fair value’ or expected returns. The return is determined entirely by the price trend of the Bitcoin. And as the supply barely increases, the price is primarily driven by demand. And what is it that drives the demand? Probably not buyers who are looking to use the Bitcoin as a means of payment, as that process is slow and expensive. That leaves us with: buyers who speculate on (further) price appreciation. But what is it that would trigger an increase of the price? Simple: it just does. That mechanism really exists. Increasing prices often trigger new demands and drive further price appreciation.
To what extent the price is still able to rise is very hard to say. Another 20%? A doubling? A tenfold increase? I don't rule out any of these possibilities. I can be a bit more precise on the timing of the peak. That will be once the bottom of the maximum width of the pyramid has been reached. As soon as the inflow of new groups of buyers comes to a standstill, the price cannot increase any more. If ‘Bitcoin-pensionados’ then want to pull out, the process may very well reverse (decreasing prices, increasing sales, etc.). Try to explain that as a pension provider to your constituencies and the regulatory body.
The Bitcoin will probably already tumble prior to the investment case, as it doesn't fit within the investment convictions. You cannot call the Bitcoin sustainable when you look at its considerable energy consumption. It is a bit pointless to have the energy provided by the new wind and solar parks immediately absorbed by the Bitcoin.
Returning to the word ‘still’, I think it will still take a while before the pension investors have overcome their hesitations. How long? Longer than it takes to build a pyramid.
Charles Kalshoven is Senior Strategist at APG
“You work in the pension sector? Wow, exciting...” Plenty of preconceived notions about working for a pension fund or administrator. Perhaps not all justified, as shown by a series of portraits about people who work there on a daily basis. People like Jill Kleuters, who is a lawyer: “I think about the opportunities and risks for the fund and always keep an eye on the interests of all the stake holders in this. That that is more than just telling them what is and what is not allowed, according to the Pensions Act.”
You are a lawyer at APG. What do you do?
“I work in the Fund Services department and, in nutshell, that means that my coworkers and I provide advice to our funds, committees and social partners about all kinds of legal pension subjects.”
“One of the main themes in the coming years is the new pension system. We help funds to make good choices around this new system. In addition, we also support the funds in legal procedures of participants or employers.”
Giving advice, helping... can you give a concrete example of that?
“We help pension fund managers to carefully weigh the interests of all the stakeholders within a fund. And we deal with objections and appeals, which puts us in direct contact with the participant. We include that information in our advice about a future arrangement. For example, the retirement age, which rose to 68 a few years ago, because our average lifespan is longer than before. Raising the age to 68 means that the participant accrues less pension per year; he or she gets more time to save up for their pensions. In the game of negotiations for a new pension arrangement, it is therefore said that something should be provided to offset that lower annual accruement. That may be a premium reduction or more of a pension in a different part of the arrangement, such as the partner pension. My coworkers and I also help the pension funds and social partners, such as employers’ organizations and employers’ representatives in these negotiations. What are the options based on the law, what costs are related to that, what does that do to the participants, how do you communicate the new arrangement to the participant and how can we execute the decisions?”
You are working a lot with the law around Wage tax and the Pension Act. Do you look for loopholes in these laws?
“Haha, no. You run into that mainly in advocacy, when you want to get the best for your client. And yes, I do try to get the best for the pension fund and the social partners too, but not through loopholes in the law. I show them an article and indicate to them how we can best apply it and what kind of consequences that will have. I also provide advice as a lawyer for ABP and that pension fund has a certain reputation. So, I can’t afford to always be looking for the boundaries and exceptions.”
People always do know where to find me as soon as they start to get closer to retirement age
How do you differentiate?
“As a lawyer, I don’t just say ‘this is allowed’, or ‘you should do that’. I don’t open a law text and read what it says literally. What I do is to indicate the pros and cons so that a fund has a clear idea of what risks come with a particular choice.”
Is this the kind of work you dreamed about when you were a little girl?
“No, not really. I wanted to be a ballet dancer. But I’m not very good at that, so that dream didn’t last long. What then? I always know right away what I don’t want, but not what I do want, because there are so many things I like. And so, after I graduated from high school, I opted for general economy in university. When I finished that, I still didn’t have a concrete goal in mind. Through a little side job at the Revenue Office, I landed in the field of tax economy and tax law.”
Do people walk away from you at a party when they hear what you do?
“No, but I don’t talk about my work at parties. My peers are not thinking about their pensions yet, so that subject just doesn’t arise. What we do often talk about is the career steps we make or the development opportunities you get from an employer, and as an APG employee, I look pretty good in those respects. I have a lot of opportunities to take course and a few years ago I became a team leader of several lawyers. And those are things you can talk about. Incidentally, people always do know where to find me as soon as they start to get closer to retirement age.”
More than a quarter of the independent entrepreneurs is not saving money for their retirement. Three out of five of these people are at risk of accruing less than 70 percent of their income. It is therefore good news that the pension funds will be able to offer pension solutions to self-employed persons in the near future. But more room is required to experiment in order to offer suitable solutions, claims strategic policy officer Tinka den Arend. That room is insufficiently offered in the current draft Act on the new pension scheme. That's the reason why a new cabinet still has to make sure that room will be offered.
Most independent entrepreneurs have to make their own arrangements when it comes to their retirement and their surviving relatives, if any. However, saving for pension does not come natural to them. Approximately 40 percent of the self-employed persons have arranged their pension well: they accrue pension in the amount of 70 percent of their income (this is excluding assets accumulated as a result of having their own home). The others are at risk of experiencing a financial black hole between the intended income upon retirement and the income they will actually get paid. More than a quarter of these independent entrepreneurs is not saving any money for their retirement.
For the self-employed persons who are saving money for their retirement, the most popular ways are saving money on a private account, investing and paying off the mortgage on their own home. And that's a shame, as they are missing out on the tax benefits applicable to traditional pension savings - excluding those who take out life annuities which only 1 out of 10 self-employed persons is doing.
What is the reason that many people are not showing interest in the details of their pension? Why are they not taking measures in order to avoid pension deficits? Research conducted by the AFM (Netherlands Authority for the Financial Markets) shows that consumers have to overcome huge obstacles in order for them to take action on his or her pension. Many people don't like to think about the future in which they are old and no longer working. They know it is important to accrue some pension but are more focused on the needs of the present. They are also not very worried about their retirement provision because others in their social group are also not thinking about it. Moreover, it is difficult for people to oversee this type of choices and the consequences thereof - also because a changing (financial) situation requires new decisions. The insecurity about those decisions causes them to largely block the topic and to not take any decisions at all.
All of these behavioral-economic obstacles are important to keep in mind if we want to encourage self-employed persons to accrue adequate pension provisions.
Independent entrepreneurs who are not saving money for their pension have been asked why they are not making any arrangements. The reason mentioned most is that they cannot afford it. Others state that their pension age is still very distant in the future or that they haven't got round to it yet.
APG collaborates with bpfBOUW, ABP and self-employed persons’ organizations in order to perform experiments with the goal of eliminating these obstacles. Other implementing organizations and pension funds are also participating. Depending on the implementer and the fund, the experiments are used to test a number of solutions. One of these solutions pertains to automatic participation with the possibility to deregister. The choice to save for pension then shifts to the present and procrastination will lead to saving instead of not saving. In addition, enquiries made at the peers of the self-employed persons will in that case also encourage them to think about this choice. A second solution is simplification of the product by means of less administrative hassle. This can be done through data exchange and simple tax rules. A third solution is sought in the improvement of the affordability of pension by having the clients of self-employed persons contribute to the pension pay. Possible fears of needing the pension capital set aside for necessary business investments in the future, is eliminated by allowing the intermediate withdrawal of the annual premium.
A pension solution for self-employed persons has to be appropriate. The differences between the target group are huge. In order to meet that variety of needs, it is important that some experiments are conducted using several solutions.
The (draft) Act on the future of pensions provides too little room to conduct those experiments. None of the three solutions mentioned above will become possible. The draft Act makes it possible for self-employed persons to join a pension fund on a voluntary basis. But other voluntary possibilities, such as automatic participation with the option to deregister, are not allowed. The same applies to an element such as data exchange. By providing pension funds access to all data of the Chamber of Commerce, it would be possible for them to see who is registered as self-employed person and in what sector. That enables a certain pension fund to approach the self-employed persons who are eligible for participation in that specific fund directly. In that case, those independent entrepreneurs would have nothing to worry about.
The current draft Act doesn't provide any room to experiment with simpler tax rules either. Based on the income and the hours worked three years ago, a self-employed person now has to demonstrate that he or she is eligible for tax-friendly pension accrual. The barrier will become much lower for this group if an agreement would be made, allowing them to accrue a certain amount without having to provide any data.
It is a missed opportunity if these solutions are not being tested in practice. My appeal to the new cabinet, is to still provide sufficient room to conduct those experiments. The goal would be to jointly take the steps needed towards a good pension for people in paid employment as well as for self-employed persons.
Gerard van Olphen calls for a middle ground between advisory services and “execution only”
“It must be possible for employees to receive assistance and coaching from organizations they trust, such as their employer, pension fund, or trade union. Moreover, as a pension fund you want to be able to coach your participants without directly providing them with full-scale financial advice.” These words were recently spoken by APG’s departing CEO Gerard van Olphen at a meeting of the Netspar network for studies on pensions, ageing, and retirement.
Van Olphen: “There are only two flavors. One is ‘execution only’, in which the client has to handle everything independently. The other involves the client paying for advisory services.” This is why he is calling for a “middle ground”, in which a fund can coach a participant “without directly providing full-scale financial advice.” Van Olphen calls the fact that the Netherlands Authority for the Financial Markets (AFM) is giving some thought to alternatives in addition to the two currently available consultancy concepts “a positive development.” The subject of Van Olphen’s lecture was the transition towards a new system – a transition in a sector that he referred to as “relatively traditional.” Van Olphen: “There are considerable social benefits to mandatory participation, such as the virtual elimination of poverty among the elderly, but it also leads to a lack of incentives in the way of innovation and renewal. Innovation will not lead to a growth in participant numbers. Neither will poor performance cause these numbers to dwindle. Growth or shrinkage depends on other factors.”
Nevertheless, the pension sector needs to regain the confidence of participants when introducing the new system, says Van Olphen. “This means that the services offered need to satisfy the expectations of the participants. They are used to the delivery speed of Coolblue and the convenience of Netflix. Furthermore, they expect their fund to keep them informed at relevant moments. And they expect their pension fund or administrator to provide insight into its financial health and to help them make difficult decisions in relation to their pension.”
How do you survive as a pension administrator of eight funds in a year overshadowed by Covid-19? Annette Mosman, our recently appointed CEO, believes it was the ultimate test case and that APG really held its own through it. “In 2020, employees started working from home overnight, we kept the pension administration of 4.7 million participants running from three thousand home offices, and we didn’t panic when the stock market fell hard. We turned out to be a robust, agile organization.”
A new CEO, a new sound? What will we notice about Annette Mosman’s approach?
“I’m starting this job with a clear premise. I am from within the organization, and I know the sector. As CEO, I am going to do things my own way: often by listening first and reacting later. I am always curious about other people’s visions. Accents will shift, but the route is rock-solid. First of all, we are going to perform really well. The coming years will be geared towards the end result: implementation of the new pension contract (NPC), in collaboration with our funds, in 2026 and being a strong social player at the same time. Because we are doing this for the financial fitness of 4.7 million people. To reach that goal, we will have to be consistent in the next few years: eyes on the ball and do what we have agreed on. We have to do it right: with our attention on our funds, employers and their participants, on each other and on our environment. We are in this for the long haul and the trajectory will have its ups and downs.”
What will be the highest priority for you in the next while?
“Our established strategy for the coming years. Our focus is now on its execution: introduction and implementation of the NPC is our first priority; everything comes after that. We will be making clear choices and carrying them out superbly. We will be doing that with a strong social profile: we are inextricably linked to the 4.7 participants of our funds, with employers and with other partners in society. If we do our job well, we will be a thought leader as a pension administrator and a key player in the sector.”
This is the first annual report where you are the CEO. Transparency plays a central role in the report. Why was that decided?
“For the second time in a row, we are publishing an integrated report. In it we show what value we add to our stakeholders: our clients, society, shareholders and the funds. We are aware of our role and are taking a critical look at it. This is the main theme of this annual report. We are not an ordinary company. We work for 8 funds and 4.7 million participants and manage almost 600 billion Euros. In addition to being a learning organization, APG also focuses on the social impact we have. Being transparent, like we are in this annual report, means that we are also showing our vulnerability and therefore also showing what did not go right. If something is wrong with out execution, or the collaboration with the Works Council is not running smoothly, we will communicate about this.”
The road to the NPC is long and complex. What exactly does that road look like now?
“We don’t want to be faced with any unpleasant surprises when we start the transition to the new pension system with our funds. That is a crucial component of our strategy and that is what our clients expect from us. It is also a precondition for transitioning to the new pension system. Compare it to an attic you need to clean out before you move. In our case, for example, that means working with our funds to tackle the complexity in the current plans. But it also means going through the pension administration and fixing it if something is unexpectedly wrong somewhere. Fixing this is complicated, especially when it has an impact on people’s wallets. In collaboration with the funds, we are trying to find solutions that are in the best interest of the participant.”
We play a certain role, but we never do this alone
What does that mean for APG in concrete terms?
The transition to the new pension contract will affect the work of almost all employees within APG in the coming years: from IT, pension administration, asset management, risk management, client contact and communication to HR. It will change our work in almost every respect. This will demand a lot from us as an organization and from our employees in the coming years. At the same time, it offers APG the opportunity to show that even in a new system we can live up to our position as a leading administrator. Because we are a leader in our field for good reasons. With our digitalization, participant orientation and pension expertise, we have all the ingredients needed to create a new proposition and to measure up to other financial parties. We also have eight loyal clients who are going to go through this process with us. So, let’s not stare into the headlights, but get on with implementing.”
In the past year, things went wrong in the execution a few times. How do you look back on that?
"That’s true. In August 2020, for example, an action surrounding the disability pension was completed. In the process, a total of 8,352 participants were retroactively awarded the pensions they were entitled to. Some 8,500 participants also received a rightful supplement for coinciding periods of service. For the participants in question, this made a big impact. And as a pension administrator, we understand this very well. That is why we are doing everything we can to carefully inform participants and assist them in these kinds of situations. And we also learn from them. Over the past year, despite the Covid-19 pandemic, which forced us all to start working from home, we have improved our processes enormously and where there were problems for participants, we have solved these as quickly as possible.”
Is the chance of errors really going to be less now?
The store is being renovated while sales continue. It seems like Covid-19 barely affected APG.
“The switch from office organization to home-based organization went smoothly. Operations - including paying pensions, collecting premiums, investing - were not compromised at any time. Pension fund clients, employers and participants hardly noticed that we supported or spoke to them from home instead of our offices. And in many cases, we are still doing that. I am very proud of that.
There is a lot of talk about APG’s role as a social player. How is APG going to fulfill that role in the next period?
“APG is a company, but it is really much more than that: as the biggest administrator, we play a certain role, but we never do this alone. If we do our job well in the coming years, other parties, such as funds, will want to collaborate with us and join forces with us. At the same time, I want to look beyond that: because with our knowledge and skills, we could mean a lot more for people and for society. Financial security affects your health, your wellbeing and your opportunities. Your pension is not a stand-alone thing. That is why I want to seek more connection with social partners, for example, around themes like health, financial education and poverty reduction. APG employees can actively contribute to that. Taking care of our environment means also taking care of the planet. We are investing with a view of the long term and in as sustainable a way as possible. Our operations will be climate-neutral by 2030. That is why we are moving to a new, sustainable building at the end of the year. And we are working on a new mobility plan for all APG employees. We will be looking without any dogma at what is good for us and for our environment.”
Finally: what are you looking forward to most in 2021?
“Seeing coworkers again and being able to go back to the office. But I'm also looking forward to the steps we're going to take towards the new pension contract. That is really a very complex process. So, I hope that the politicians in The Hague will stick to the established timeline. I am still assuming that on January 1, 2026, all funds will have to make the transition, and we really need that time.”
Read the interview with Ronald Wuijster, board member and person responsible for Asset Management and HR: “Selling from a sense of panic is never a good idea” - Ronald Wuijster on investing during a Covid year.
How do you deal with work and money for now and later in life? Do you live day by day or do you deliberately plan your financial future? And will you deal with “later in life” yourself, or are you part of a pension fund?
Ruud Vorstermans has been enjoying an excellent pension for the past year and a half. But he would trade it all in if it could bring back his wife.
Ruud Vorstermans (68)
Profession: retired, worked in automation and as a labor expert
Weekly hours: full-time
Income now: 3,200 Euros net per month
Saving: about 50,000 Euros
Pension arranged? Yes
You have been retired since August 2, 2019. How do you like it?
“I did not experience any black hole, even for a second. In fact, I don’t have enough time. I was really ready not to have to do all kinds of things anymore. That is also because, in addition to my work, I was the primary caregiver of my wife for years. She had metastasized breast cancer and died of that in 2018.”
That is sad, you must really miss her.
“Yes, my wife brought out the bet in me. We were married for nearly 43 years; what we had was unique. Of course, I miss her, but getting stuck there doesn’t help anything. Four weeks after her cremation, I went to Italy for a month with a camper. I traveled around Toscani, to places where we used to go together every year. A trip down memory lane. I enjoyed it a lot. I am keeping the memory of her alive. On our first wedding anniversary after her death, I got dressed up and went to her favorite restaurant, in a suit and tie and sat down with a picture of her across from me. I really enjoyed doing that and I still do it every year.”
How do you spend your days, now that you are no longer working?
“To start with, I walk and ride my bike a lot. I have made it into a daily routine to walk about seven kilometers. I ride an electric bike, because then I can also cycle on vacation in hilly landscapes. And I have given myself a new hobby: doing jigsaw puzzles by Jan van Haasteren. Once in a while, I buy a second-hand puzzle through Market Place or Facebook. If the seller lives within a 20-kilometer radius from where I live in Bergen op Zoom, I go and pick it up on my bike. That gives me a nice goal for my bike trip.”
And what else do you do?
“Sudoku, cross word puzzles, sometimes I write poetry, I have a blog, I cook. My wife was a great cook. When she got sick, I started to use her recipes so that she could give me instructions. I took pictures of everything and made it into a cooking blog. That helped me a lot, especially right before she died. I also do volunteer work for the breast cancer society. My wife did that too, from the day she got breast cancer until she died from it. She was given an honorary membership for that. It soothes me to continue her work. I have a Facebook group for women with metastasized breast cancer. Because I see the positive in everything, I try to give others who don’t do that a different vision. Life doesn’t stop when you’re sick; try to enjoy what you do still have as much as possible.”
Don’t you miss your professional life at all?
“No. I enjoyed my work for 46 years, but that was enough.”
What kind of work did you do before this?
“In 1975, I started at the former GAK (common administration office, ed), my dad worked at the head office in Amsterdam. I had no idea what I could do with my high school education and my dad said: why don’t you try working here. I got to try out automation and I stayed there for 25 years, and eventually became a manager. But at a certain point I needed a change. In the early nineties, I went back to school and completed 3 higher education courses; a legal one, related to personnel issues, commercial economy and business management. After that I started to work as a labor expert. First at the former UWV and later in health and safety services. That’s what I did until I retired.”
Did you do that full-time?
“More than that. I started at six in the morning and didn’t go home until after rush hour. I worked about 12 hours a day. But that really paid off. All those extra hours provided me with a 30 percent bonus and if you achieved a certain target, you could get an extra bonus on top of that. That’s what I used to buy our first camper.”
What was your income before you retired?
“My monthly salary was 5,500 Euros gross.”
And what is your income now, from your Old Age Pension and your company pension?
“Annually about 55,000 Euros gross, which works out to about 3,200 net a month. In addition to Old Age Pension and my own pension, I also get a survivor’s pension of 87 Euros a month. My wife only worked part-time for about fifteen years.”
Are you happy with what you get?
“I realize every day that I have an excellent income. I would trade all the money in the world to get my wife back, but that is not an option, and I’m very happy with this. It is very comfortable. In fact, I am able to save 1,000 Euros every month. My kids, who make a lot more money than I ever did, say: come on, Dad, why don’t you buy a new TV? But why should I? Would it make the programs any better? I spend my money consciously. When I didn’t have a lot of money, I bought all kinds of things, but now that I have money, I’m like Uncle Scrooge.”
When we realized that my wife was not going to get better, we shifted our life into 6th gear
What are your regular expenditures?
“I spend about 1,500 Euros a month on my mortgage, car, taxes, insurances and subscriptions.”
What else do you spend money on?
“I enjoy eating out and going to the theater. These days, during corona times, I sometimes order take-out. And I regularly go on vacation. The camper is ready to go to the Veluwe in two months.”
How much do you have in savings?
“About 50,000 Euros. It used to be a lot more, but when we realized that my wife was not going to get better, we shifted our life into 6th gear. Before that, we already did a lot, but instead of going to a concert in De Kuip, for example, we would go to concerts in London, Dusseldorf or Dublin. Just to make it even more memorable. We also took trips to America and Indonesia. In about six years we spent about $100,000 in savings. It was a little scary to my wife sometimes; she would worry that we wouldn’t have enough left for the maintenance of our house. But I wanted us to enjoy our life together while we still could and make memories. And I still enjoy them every day. I think she would be proud of me, because, despite the fact that I miss her, I am enjoying my life to the fullest.”
The people behind your pension
“You work in the pension sector? Wow, fun...” There are a lot of preconceived notions about working for a pension fund or administrator. They may not all be correct, as shown in a series of portraits of the people that work there every day. People like relations manager Marco Alberts: I get to advise people from my heart.”
What does your job entail?
“Employers have a responsible role by virtue of legislation for the increasing of pension awareness of their employees and for improving pension communication. They are also the first point of contact for their employees with pension issues. I help them to take on that role and carry it out. This generally means that I make employers aware of the law that applies to them and explain to them what it means. This makes me a main link between the pension funds and the employers.”
Do you visit the employers all the time?
“No, not at all. Relations managers visit employers once or twice a year, depending on the need, and discuss things like the developments of the secondary labor conditions as they relate to pensions.”
And that makes you happy?
“It triggers me to help that employer take action.”
Because they would rather not?
“What I’m doing now is something we didn’t dare to do in the past: I really make the employers aware of their responsibility. And I must say, it is quite successful. And that is good, because in the Netherlands, when people hear the word pension, they immediately way that it’s far in the future. ‘We don’t have to think about that yet’, is a common reaction. I then explain that it is not only about old age pension, but that the pension fund will also provide an income for survivors if you die, as well as an income in the event of disability. And for me, the challenge is to make the employees understand that. And I need the employer for that. He or she must understand the importance of the financial fitness of the employees.”
And how exactly do you help the employer?
“There are various tools, but I don’t pull all kinds of tricks out of a hat, just to give out some random stuff. First, I find out exactly what the employer wants to do. Then I customize those wishes and needs. For example, there is pension academy where we polish up how much the HR department knows about pensions.”
Are there any employers that don’t want your advice?
“Not many, but there are some employers that send their employees directly to the pension fund. And if they don’t want our services, that’s fine. Then we’re done. This partnership has to come from both sides. That may sound harsh, but that’s the way it is.”
Is this job challenging enough for you?
“Pension is a complex matter. That is why participants often give up. Our challenge is to make pensions accessible. That makes it easier for both the employer and the employee to take action. I’m kind of a guide for that. The moment an employer understands the importance of my advice and asks me to help them, is one of the best aspects of my job, as far as I’m concerned. That’s when I get excited.”
You used to work for commercial insurances, how did you end up here?
“Where I worked before, targets and return were very important. The people not so much. And that didn’t sit well with me. I didn’t want to recommend or sell anything if I knew it didn’t suit that person. As a relations manager, I get to advise people from my heart.”
What did you bring with you from that commercial experience?
“I’m clear; I tell things as they are. I directly make people aware of their responsibility and at the same time show them the benefits of their effort; what the return is. And then a conversation naturally ensues.”
Do you really make a difference for people?
“Look, collection the premium and paying out pensions is not that exciting. Aside from the fact that we are investing billions of Euros. But what I do is to create pension awareness. I show people that once you’re dead, you simply cannot provide a pension for your surviving family members. And that you’ll miss out on a lot of money if you don’t arrange a disability pension in advance and you are suddenly injured in the workplace. And if you find out that your pension is insufficient once you’re retired, there is nothing we can do about it then. When that penny drops for the employer, I can see the wheels turning and I recognize the beginning of pension awareness. And this is beneficial for those employees because they will then be given that information.”
Do people avoid you at parties when they hear what you do for a living?
“No, on the contrary. I always get a lot of questions. People want to know what happens to their money or why we don’t do indexing. How is it possible that you may have decrease people’s pensions, is another question I often hear. Or they want to know why there is going to be a new pension contract.”
And what do you tell them?
“People often know that ABP has 493 billion. That’s a tremendous amount of money. But what they don’t realize is that if everyone continues to live longer, we will not be able to pay their pensions out of that pension pot. At some point it will run out. Answering all those questions is kind of a sport for me, otherwise I wouldn’t be a relations manager.”
Regardless of the demographic development of the Netherlands in the coming years, the state pension will become less and less affordable. Unless female part-timers start working more hours and the Dutch work longer on average, argues Johan Barnard. Every year, the state pension is paid by working Dutch people so the more people work, the easier it is to bear the state pension. However, men do have to take on more care tasks. And for the lower incomes, 'part-time retirement' will have to become more attractive from a tax point of view.
In 2020, the Netherlands Interdisciplinary Demographic Institute and Statistics Netherlands published “Bevolking 2050 in beeld: drukker, diverser en dubbelgrijs”. This report about the Dutch population pictures various scenarios: how is migration developing? How many children do we have on average, and until what age do we live? The report then predicts the impact of those scenarios on the size and composition of the Dutch population.
This predicted demographic development makes it clear once again that the state pension will become less affordable in all scenarios. In contrast to the pension you accrue through your pension fund, the state pension benefits are, in principle, financed each year by the contributions and taxes collected from workers (pay-as-you-go system). An aging population means fewer people in work, who effectively have to pay the state pension for a larger group of Dutch people. In 2020, for example, there were almost 3.4 potential workers per state pension recipient, while the central Statistics Netherlands forecast for 2050 is slightly more than 2.7. The pressure on the ability to finance the state pension is therefore increasing.
The report also shows that a larger size or more favorable composition of the population will not be enough to solve this problem - even in the most positive scenario, with the highest number of workers. Moreover, important factors such as the number of children and migration are difficult to control. The Netherlands will therefore have to look in a different direction to solve the problem of the financing of the state pension.
Which buttons can the government still turn? In theory, you can raise the state pension age even faster, lower the state pension yourself or significantly increase the premiums and taxes for the state pension. But some solutions are more effective, aimed at actually keeping or getting people who can work into work. Older employees and women are particularly interesting in this respect.
The Netherlands strives for a situation in which we retire later, as close as possible to the - slowly rising - state pension age. That's another trend we've noticed. But it turns out not to be easy for everyone to retire later. In the long run, you can do something about that problem through more periodic training and education during the career, so that people can go in new directions in time and don't get stuck so easily.
Possibilities that can help in the shorter term include demotion - going back from a higher position to a lower one - and/or part-time appointments. Of course, an employee must be left with enough income. For those who would in that case end up below a certain income level but who can bring their supplementary pension forward, you can make part-time retirement more attractive from a tax point of view. This way, you prevent large groups of people from making use of that possibility - and labor participation actually decreases - but you do help the people who really cannot work that much anymore.
In terms of part-time work, the Netherlands top the list in OECD countries. Nor is there any other country where the percentage of women in the total number of part-timers is so much greater than that of men (see also the OECD report "Part-time and Partly Equal: Gender and Work in the Netherlands"). A report from the Ministry of Social Affairs and Employment and the Ministry of Education, Culture and Science last year also extensively discusses the great preference in the Netherlands for one and a half jobs per family, whereby men work full-time and women part-time - and women account for the lion's share of the unpaid domestic work and other care tasks. The report outlines potential alternatives, but leaves the choice to politicians.
When those choices are made, perhaps as early as the formation of a cabinet, the consequences for the affordability of the state pension, in particular, will have to be taken into account. If we opt for more equality between men and women and encourage women to work more, this will also work out well for retirement. Ideally, the number of hours worked per family will increase, with the number of hours spent by husband and wife coming closer together. And all Dutch people who are capable of this will have to be encouraged to continue working until their retirement date. We need solutions for those who are unable to do so and therefore run the risk of poverty. And if we want women to work more (paid) hours and not fall over, they will have to be enabled to do so. This is only possible if men take on more care tasks and we also better organize society accordingly - primary education and childcare, for example, but also the (financial) appreciation of informal care.
A pleasant - but not unimportant - side effect is that the existing 'gender pension gap' in supplementary pensions from pension funds can also become a lot smaller.
How do you deal with work and money for now and in the future? Do you live from day to day or are you deliberately planning your financial future? And do you arrange ‘later’ yourself or are you a member of a pension fund?
Alexander Mullenders had his own company, but now has to make ends meet living on WIA benefits (Occupational Disability Benefit).
Alexander Mullenders (48)
Profession: None at the moment, previously interim manager and consultant in the field of marketing, sales and customer service
Weekly works: Not, he suffers from a burnout
Income: WIA benefits of 990 euro per month
Pension is arranged? No
How did you become incapacitated for work?
“I ended up suffering from a burnout and depression when I was in deep financial trouble. Things started to go wrong when I wanted to expand my business by taking over another company. The other company had the legal status of a general partnership, with existing clients I thought could just be transferred. As it appeared, the latter wasn't the case when it comes to a general partnership. All clients were able to leave and so they did.”
Leaving you with a company without revenue?
“Yes, and that while I had made significant investments. There was no money coming in at all and I was unable to pay the instalments. In such situation, your money is fading rapidly. I tried getting things back on track for a couple of years and even started working for an employer for a while in order to make at least some money, but by that time I was already completely burned out. You just cannot imagine what it is like to worry about money day in, day out. You are only busy trying to survive. I think that situation breaks down nine out of ten people. You are constantly living in fear that another bailiff shows up on your doorstep and yet another letter from a debt collection agency arrives by post. And that is not to mention the shame. It took me about four, five years before I finally dared to ask for help."
What was the amount of your debt by then?
“Approximately 150,000 euro.”
How did you manage to get out of that situation?
“After a lot of hassle, I finally received debt counselling from the municipality of The Hague. For many years, I lived on the absolute subsistence minimum. The process is completed now, but there are still some unpaid bills from that time that have meanwhile increased to an extent for these bills to create new problems. I am not quite worry-free yet when it comes to money.”
You now receive WIA benefits for partially disabled.
“Yes, those benefits amount to around 990 euro per month, but these payments will come to an end in three months. My income then decreases to 70 or 80 percent of the level of welfare which is about 852 euro. I am barely able to make ends meet receiving 990 euro. It is a big help that my mortgage payment is even less than 200 euro, but I would have major problems should the interest suddenly rise.”
How will you manage?
“I honestly don't know; I think I have no other choice but to work. I don't receive any supplements to my welfare payments from the municipality because I am a homeowner. They just tell me I should first sell my house. That seems a bit weird to me because, when I sell my house, I am entitled to social housing and housing benefit which would cost society a lot more at the end. The government is so much focused on not having one euro end up in the wrong hands, that a lot of money is not awarded to people who actually need it. It is definitely not my intention to plead for simply cancelling debts, but I do believe society has the wrong image about people who have debts. These people really aren't profiteers who are unable to handle their money. Most of them suddenly ended up in a situation of disproportionate hardship, for example because they lost their job or partner.”
How much did you earn previously?
“Back when I was still an entrepreneur, I easily earned between 8,000 and 10,000 euro per month. I used to go out for dinner very often, took extensive winter holidays and long weeks of summer holidays, wore fancy suits and shoes. I didn't have to think twice about any of that. The contrast is huge. It is my birthday today but I cannot even come up with a present I could ask. I am no longer thinking about new shoes, clothing or fragrances. I no longer have any wishes because I know I won't be able to buy anything.”
I assume we don't have to ask you about your savings…?
“No, I am not saving any money. I just make ends meet every month. The entire house of cards collapses should something unexpected happen.”
What is your plan for the future?
“I am currently in the process of retraining, made available by the UWV (the Employed Person's Insurance Administration Agency), to upgrade my CV in order for me to be eligible for a job in policy advisory. I have also established a foundation, Stichting Scipova, in an attempt to improve the process of debt counselling. I hope to be able to turn this into paid work in the future. I have been through so much myself; I want to prevent others from having to go through the same. It would already help if policymakers would talk to an experience expert such as myself more often, prior to hem preparing new plans with the intention of helping people in debt. I really want to commit to that goal.”
Do you think about your old age sometimes?
“I would like to, but I am not sure how. I always said I wanted to be able to stop working at the age of 50, but that's no longer feasible. I used to have a large sum of money on my banking account, but that money all disappeared. I do have an apartment at an attractive location and I expect that apartment to be worth a lot more in a number of years. Other than that, only AOW (state pension) will be available to me and a very small pension on the few years I worked as an employee at the start of my career. But if I get a job later on and have 600 euro per month more to spend, I can easily save a few hundred euros per month.”
Is that enough?
“I don't know. Maybe, if I am able to save 200 euro per month over the next twenty years, it could possibly be enough. My life currently revolves around the short term and I cannot afford the luxury of looking further ahead. It is just not possible for me to put any money aside. Fortunately, I still have some time left. And it's also a big help that I have meanwhile become accustomed to living on very little money.”
Series: Work & Money
How do you deal with work and money for now and in the future? Do you live from day to day or are you consciously planning your financial future? And do you arrange ‘later’ yourself or are you a member of a pension fund?
In this edition: Erica Pierik, (copy)writer, keeps her expenses as low as possible to have more leisure time.
Erica Pierik (45)
Weekly works: between 15 and 30 hours per week. On average 1 day as a copywriter and the remainder of the time as a writer of books.
Income: approximately 1,500 to 1,600 euro per month
Savings: 4,000 euro in a joint account, 10,000 euro in private
Pension is arranged? Yes
What is it that you do exactly as a writer and copywriter?
“I write books. My first book, Een boek over wereldvrede (A book on world peace, ed.), was about my search for a more beautiful and sustainable world. My second book is almost finished and is more about world peace in miniature, about my attempts to find peace and quiet in my head and, eventually, also in my life. In order to earn some additional money, I take on writing jobs for local authorities for instance.”
Is that enough to make ends meet?
“I have calculated that, if I get paid about 1,200 to 1,300 euro on assignments, it is enough for me to earn my keep. I usually succeed in doing so.”
Are you satisfied with your income?
“It is enough. Time is more important to us than money. We have truly made an effort to lower the significant costs, such as mortgage payments, as quickly as possible. We are also almost energy-neutral. The investments we made, now pave the way for financial peace of mind. We don’t have to work a lot. I allow myself some ‘time off’ whenever I feel like it.”
How much savings do you have?
“We have a joint buffer of 4,000 euro, our own buffer separately and an investment account amounting to 20,000 euro. It is our goal to have the latter grow so we are able to work less in about ten to fifteen years and can live on the proceeds. My corporate buffer amounts to 10,000 euro which is enough for me to live on for about seven months should I not have any other income. My husband’s buffer is approximately 3,000 euro.”
How much do you pay on fixed costs?
“We live on approximately 2,000 euro per month. We have almost repaid the mortgage on our house in Amsterdam-West and we only pay 150 euro per month on housing expenses. We used the excess value on the house we lived in previously to pay towards the mortgage on the new house. We deliberately chose to move to a house half the size and less expense. In addition to our mortgage, we pay fixed costs such as the association of owners, internet, telephone subscription, insurances and our private lease car.”
How do you divide those expenses?
“My husband holds a permanent position as a college teacher and team leader which earns him about 2,700 euro per month. He contributes slightly more to our housekeeping than I do. And he made the conscious decision not to work more than four days per week.”
What else do you spend your money on?
“Being a writer, my laptop is extremely important. I have now also purchased a quite expense Apple Watch, motivating me to exercise more as I spend a lot of time sitting behind my computer, especially during this corona pandemic. Apart from that, I spend some money on my hobby art journals, but that mainly involves beautiful pens and washi tape and doesn’t involve huge amounts of money.”
What do you arrange for the future?
“To be honest, I believe that by the time I would be allowed to retire, the pension funds will have evaporated for the large part. The AOW (state pension, ed.) also doesn’t seem sustainable to me, as increasingly less employed people have to pay for an increasingly larger group of older people. In my opinion, the best pension scheme is to have as little expenses as possible and to wish for as little as possible. But that doesn’t keep me from putting some money aside. I transfer an amount of 150 euro to BrightPensioen every month and that amount is invested on my behalf. In addition, I also accrued some pension at ABP from the time I was working for the municipality of Almere and prior to that, Kunstenaars&Co, currently known as Cultuur en Ondernemen.”
How much money will you receive every month once you retire?
“I have currently deposited 11,100 euro at Bright. The way it stands today is that I will receive 1,625 euro net per month as of the age of 67 and 3 months, including AOW.”
What could you still improve in terms of your pension?
“Our fixed costs could be lowered even more and I would like to invest a bit more money. But in particular, I think I just shouldn’t want too much, later on. When I hear all of those people saying they want to travel the world once they retire, I think: Oh, come on, by then your legs are sore or you may suffer from rheumatism, surely you don’t want to do all of that? As a writer I am able to continue my work until I’ve reached an advantaged age and I won’t be needing a lot more than just my laptop. That’s the thought I hold on to. A laptop, the internet, three meals a day and a roof over my head, that’s all I really need.”
When retiring is extremely disappointing
The dreaded black hole and how to rise from it
Retirement. Finally, doing what you like. That turns out to be more difficult than expected for many people. Some fall into a 'black hole'. How do you prevent that? And can you recover? Retired Joep Athmer has the answer to those questions. Experienced first hand when he hit the bottom of the hole. "Every day, I make sure that people see me, that I remain of value."
"Days without a deadline, with plenty of time, while that time - conversely - is shrinking rapidly in volume." Does the world shrinking continue? The narrowing of the horizon?" Signed: journalist Wim Boevink, who as a retiree in his column in Trouw wondered what life looks like after your retirement. Once retired, he said in an interview: "That retirement date has been fixed for years, and there's something nice about that. I think it's good not to go on too long, you shouldn't live off your success forever. You also just have to go at one point."
"Just going" turned out not to be that simple for Joep Athmer. He was a board member of a large internationally operating multinational and regularly flew to distant, exciting destinations. "In the job I had, you keep growing. You think you're untouchable, but then when you retire, everything is suddenly gone. Instantly, you go from someone with appreciation, interest, someone everyone knows, back to 'this is just Joep Athmer'. I found that hard."
Where did it go wrong?
"Six months before my retirement, I was already heading for that dreaded black hole. I managed one more important final project at work, estranged from my wife and children, and liked everything in life better than what I already had. It was a combination of the fear of what was to come and the exciting things that came my way. And I didn't talk about that feeling at home.
Suddenly, I wanted to catch up with everything, build a new life of my own. Everything had to change. I got my motorcycle license and met new people. I didn't think about going back to a life of suburban bliss. And I kept that up for quite a while. Until about three quarters of a year after my retirement. At my lowest point, I even lived on my own for six months. I was just lost for a while."
How do you look back on that time?
"I learned a lot about myself, while I had been managing and coaching people for years. I was half psychologist and half priest, and I said the right things to employees at those times. But I just didn't know what to do to get out of there.
I found out that I threw away a lot. That I would be much happier living a life with everything I had built and loved than a life of partying. With the help of two people who have never criticized me, I found my way back. And now, I find happiness in small things. That wasn't an easy route. Because pride and loss of face got in the way. I really had to rise above myself for that. "
Did you seek help?
"I followed a Pensioen in Zicht course with my wife. For us, it went beyond thinking about where we wanted to go on holiday: it was also a way to rethink relationships within the relationship. We needed that to be able to continue together, as partners and as a family.
By the way, it was good to see during the course that other men and women in managerial positions, each in their own way, struggle with the same thing: 'do I still matter?'.
Did the roles change?
"To be honest, I was married to my job more than to my wife. But then you retire and you sit at home, without that important position. Your family already knows you, so they act normally and expect you to clean out the dishwasher too. I really had to get used to that."
It takes a lot of effort for me to do nothing for a day
You've now been retired for two years, what do your days look like now?
"It takes a lot of effort for me to do nothing for a day, to read a book. Even though I rationally tell myself 'come on, Joep, you have worked hard for 41 years, so it's fine now'. I want to do something active, something useful. I also need structure. So I plan something in my agenda every day, business and private. That gives me peace of mind. And I'm getting better at scheduling more and more private things."
Do you still work?
"I don't sit still, that's for sure. I'm an informal caregiver for an elderly neighbor, I'm the chairman of a museum and member of a cycling club. I've also followed various courses, because I think you're never too old to learn. I currently have about five freelance jobs in which I advise and coach professionals and (family) businesses. I just like to get involved in everything!"
What do you get out of it?
"I make sure that people see me, that I remain of value. And that goes beyond the status I had. Of course, I loved being made a leader, traveling around the world of Peter Stuyvesant and meeting the rulers of the earth. But what I really want is to train people, to transfer experience and to be of use. I really enjoy that."
And you can do that, as Joep?
"Absolutely. I don't have two secretaries to give tasks now. I don't have 380 people I can rely on. If I start something, I will do it myself. Based on my strength and knowledge. And I love that. I'm not physically and mentally ready to be sitting around idly."
Is that lost feeling of the black hole completely gone now?
"I still struggle with the fact that I'm retired. It's difficult to find the right balance. But I did find a trick for that, because I turn everything into a project that I plan. Even when I'm going to read a book. But I think I should do that too."
"A former boss of mine also took on anything just after he'd retired. 'But', he said to me, 'there comes a point, physically and mentally, when you can no longer keep up. So arm yourself for that. Plan for that to happen.' So I'm working on that too now. I read that book a little inexorably, according to schedule at three o'clock in the afternoon."
Do you have tips for other pre-pensioners to start their retirement unscathed?
"Very important: confide in someone to talk about your feelings and concerns. Second, look for hobbies, courses and side activities during the last years of your working life. Because that's when you're in the middle of society and people still know you. That's the time to bait a line. If you wait until after retirement, people will forget about you. I see that happening with retired friends of mine. They're fed up with gardening after two years, want to fulfill a position again, but can no longer get a foot in the door."
Previously published in the Retirement series: Part 1, the preparation - 'It's okay for retirement to be difficult' | APG
Retiring does not only require an adjustment from the pensioner. The partner also has to get used to it. Research by Nobuo Kurokawa from Japan shows that the wives of retired men can suffer from a rash, abdominal pain and stress. They literally get sick from their husbands sitting at home and his meddling in domestic chores. Japanese doctors call this 'retired husband syndrome', or in full One's Husband Being at Home Stress Syndrome. You can even buy special small rooms with TVs and computers. Japanese women can temporarily 'store' their husbands here to catch their breath.
APG reacts to the Bill future of pensions
In 2026 the new pension system will start. Everybody who wanted to could react on the ‘Bill future pensions’ of Minister Koolmees until February 12 February. APG is one of the parties who had a reaction. The scope: the new system offers an opportunity to start with a clean slate and to make the Dutch pension system easier to understand for the participants. But to take away some of the disadvantages of the current system without losing the advantages for the participants, there are a number of points that deserve explicit attention.
APG head of Policy Peter Gortzak and strategic policy employee Tinka den Arend explain this.
APG is a pension provider and therefore has mostly reacted from that perspective. That reaction focuses on the main points of attention for a successful new system. ‘Taking away disadvantages of the current system without losing the advantages for participants’ is one of those. ‘Solidarity’, ‘freedom of choice’, and ‘open norms’ are also keywords. Gortzak: “The combination of much freedom of choice and solidarity creates a tension field. As a pension fund and provider, you must be able to take a certain measure of investment risk. But you can only take that risk in a responsible way if you do that together and therefore invest together. If you think it is more important to give your participants much freedom of choice in how there will be invested for their pension, then you can share fewer risks. And if there are fewer people to carry that risk, then you can also take less risk.”
Written towards each other
In the new system, two pension contracts are possible: the new pension contract and the improved premium agreement. In the improved premium agreement, there is less solidarity, more risk, and more freedom of choice. In the new contract, the participant runs less risk than in the improved premium agreement, because of the risk-sharing, as mentioned. However, from the bill, it appears that both contracts differ less from each other than what Gortzak and Den Arend had hoped for. Gortzak: “Now both contracts are written towards each other. Because of that, there is a threat that in the one contract there is not enough room for sharing of risks, and in the other contract not enough room for freedom of choice. The question is if that is wise. Why not choose much more explicitly for two completely different contracts?”
It is also important to offer sufficient wiggle room for the board of the fund. In the one hundred and sixty pages of the consultation document, it is indicated in twenty different places that further elaboration in the regulation is needed. Shouldn’t there be a new consultation around then as soon as that elaboration has taken place? Den Arend: “Indeed, partially you now don’t know exactly what you are reacting to. Actually, you should propose the whole thing again. But you can also waive that detailed elaboration and leave the details to the board members of the fund. Directors of pension funds are subjected to high standards nowadays. So, give them the responsibility and the space to move within certain norms and to be accountable for it.”
Den Arend illustrates the principle with an example. “The consultation document gives three criteria to measure the risk attitude of participants. But two of those are untested norms. We don’t know if the participants understand them and how they react to them. It would be better to do some research about that first. And then let the fund boards make the choice themselves. But even then that preparedness for risk with participants is just one of the factors that a fund board should base its policy on.“
No matter how important solidarity is for a good pension; you can hardly find that word in the consultation document. Gortzak and Den Arend find that worrisome. Den Arend: “In fact, you could call the new contract ‘the solidarity contract’. But it may not be called that because you could then draw the conclusion that the other contract is not solidary.”
The faster and more direct the participants are taking advantage of the new system, the better it is. Therefore APG emphasizes in their reaction the importance of a clean slate. Gortzak: “In order to start with that clean slate, we plead for two things. First: make intercalation into it the standard option. That means that you carry over the existing pension agreements to the new system. If you don’t do that, then there will be two systems side by side. That is a nightmare for the execution, because then you have to do everything twice. The participants cannot take advantage of the advantages of the new system and you make them pay unnecessarily much. If you do intercalate, you are left with a single system for which you strive for maximum explainability for the participants.
The second thing that we plead for is that the rules of the new system apply for all new regulations of all types of pensions and coverages of risks – so including for the survivor’s pensions and the disability schemes. It now looks like the FTK (Financieel Toetsingskader [Financial Assessment Framework], part of the Pension Law in which the financial demands for pension funds have been recorded, red.) still remains intact for the payment phase of the improved premium regulation and possibly also for the disability pension and the orphan’s pension. APG pleads to not do that and to completely release the financial demands of the FTK.”
In order to make the transfer to the new system successful, that transfer must be ‘explainable, trustworthy and executable’, which is written in the reaction of APG. Den Arend: “In the bill, a framework is sketched to have the transition run carefully. For instance, steps to be taken, roles, and competencies. We can find ourselves for a large part in that proposition. But we still see a number of large risks. Trust can only arise if we can explain to participants, employers, and fund bodies that the transition will happen in a balanced way. For that, we need to use criteria and calculation methods that people understand. In order to transfer to the new system, you will have to convert pension agreements of participants according to capital – in fact, a pot of money. The methodology that is proposed now for that conversion should be scrapped from the law completely. It is too complex and not transparent enough. That makes it hardly possible to explain it. We need the trust of the participants very much. But if they don’t understand what it’s about, then you actually ask them to have blind faith. I think that is asking too much. On top of that, while using that methodology, there are many – debatable - suppositions.”
Are there any more risks? Den Arend: “Yes, because it remains to be seen if the funds and the providers can realize the new system on time. For a careful and well executable transition, additional measures are necessary.”
What will 2021 bring in economic and political terms? What will happen with the new pension contract? And with which innovations does APG respond to this? Five APG specialists tell us about their anticipations.
When the lockdown is over, you don't suddenly go to the hairdresser three times in a row"
"I assume the economy will do better in 2021 than it did in 2020. But I do keep my options open. How often will the lockdown be extended? What is the impact of the coronavirus mutants? How smoothly does the vaccination process go? There's still a lot of uncertainty. If everything goes well and we get the virus under control quickly, there's a bigger chance that governments will phase out the support measures and companies will still have to pay tax. Which in turn can lead to a wave of bankruptcies and rising unemployment.
Sentiment in the stock markets is still surprisingly good, helped by the low interest rates and the intervention of governments and central banks. Even though entire sectors were paralyzed by the lockdowns. But those stock prices don't tell the whole story. Don't forget, SMEs and freelancers aren't listed.
It's not just the stock prices that can go either way, the same goes for consumer spending. On the one hand, many permanent employees have been able to spend little money since corona; perhaps they'll start spending a lot again as soon as the shops and the catering industry reopen. But then again, that catch-up demand will be limited: you don't suddenly go to the hairdresser three times in a row. Or eat out every day. On the other hand, some people are financially stuck or keep a tight hand on the purse strings because of all the uncertainty.
Hopefully, once most people are vaccinated, consumers and businesses alike will start spending more on major purchases or investments over the course of this year. Then the global economy will gather steam again. And we may even get to a point where inflation temporarily rises due to bottlenecks. But interest rate hikes by central banks are really still a thing of the future. On the positive side, gone are drawn-out problems like Brexit, and the question of who will be the next US president. I expect a positive stimulus for global climate policy from Biden."
This year, we'll investigate how high or how stable people want their pension to be"
"There is quite broad political support for the Pension Agreement. In addition to the coalition parties, Groen Links, PvdA and SGP were also in favor. So whatever the composition of the new government, that new pension system will most likely come. Despite the fact that political parties - now that the Rutte III government is outgoing - are no longer bound by the coalition agreement.
Several important milestones towards the new Pension System are planned for this year. For example, anyone can now respond online to the "future pensions bill". This consultation round will run until February 12th. This bill is part of the broader Pension Agreement. It includes the new rules for the pension accrued by the employee and employer. The responses from this Internet consultation will be used to improve the bill so that the law can take effect in 2022, as soon as the House of Representatives and the Senate have approved. After that, the social partners and pension providers have until 2026 to switch to the new system.
The pension sector hopes to receive details about the new pension system and how to get there as soon as possible. At APG, we will of course see whether the system can be explained and implemented. We also look at possible implementation risks and the best way to deal with them. In the new system, the pension will be more directly in line with what is happening on the financial markets. This year, we'll be investigating what people think of this, and "how high versus how stable" they want their pension to be. We want to facilitate pension funds to meet the wishes of pensioners and employees as closely as possible. That's why we'll be discussing this with them this year. I think the great thing is that the new system is becoming simpler and easier to explain.
APG is going to collaborate more with other companies, because together, you really do know more"
With the arrival of the new pension system, a lot will change for employees and pensioners. They will have their own pension account into which the pension premium will be paid. You save for yourself, see the fluctuations in your own pension fund. A complicated change. We have to divide the total assets of over 1500 billion euros fairly over millions of personal pension assets. The new pension scheme will be less complex and easier to understand, but getting there still throws up many obstacles. Things like adjusting ICT systems, legal issues, you name it. Fortunately, we still have a few years.
All pension players have to deal with this. That's why APG is increasingly collaborating with pension funds and other pension providers, such as PGGM and MN Services. Not only to collect premiums together and to pay out pensions, but also to learn from each other and save costs. And to find out how we can best communicate with our participants about the coming changes.
In the coming years, people will have plenty of questions about their financial future. They are increasingly in need of a guide to help them with user-friendly solutions and tailor-made advice. Who gives them control over all their financial affairs and prepares workers well for the transition to retirement, for example.
To be able to work in a more customer-oriented way, we want to collaborate more in the coming years with specialized companies with whom we can develop apps, devise new ICT solutions or use data more intelligently, for example. Such as a digital planner that gives you an instant overview of your financial future. Together with other companies, from startups to Nibud, we want to ensure that, as a working or retired person, you can use all kinds of data to see, for example, how much money you will need later on for any desired standard of living. Reasoning from your current lifestyle. We know from research that employees often overestimate how much money they really need later on.
Thanks to cloud technology, we're increasingly able to get the most out of our data"
Innovation specialists Tom Romanowski and Anne-Marie le Doux about innovations and APG's innovation lab.
Tom Romanowski: "Under the new pension contract, every participant will soon have their own, personal pension. This is in line with the social trend towards more individualization. The sector is facing the necessary challenges.
Pension administrators such as APG are now working on all kinds of innovations. And technology continues to increase the possibilities. For example, thanks to cloud technology, we can get the most out of our data in a secure way, without this being at the expense of the privacy of participants. For instance, machine learning helps call center employees so that they can better predict the participants' follow-up questions.
Participants will be given more responsibility and will need advice when making financial decisions. Partly for this reason, APG has already launched Kandoor.nl, where you can get answers on all conceivable financial questions."
Anne-Marie le Doux: "We come up with these kinds of innovative solutions in the GroeiFabriek, APG's innovation lab. In this breeding ground, we focus not only on participants and pensioners, but also on employers and the pension funds that are customers of APG. Employers, for example, they want to know how they can help their employees to be better off financially. Together with a number of employers, we've developed an online platform that enables employees to learn more about their 'financial fitness score' and help them set realistic goals to improve them. And this year, we're also working on innovations that enable employers to make better HR decisions."
Who are those people who consciously choose to work in the pensions industry? What do they do all day for your retirement? And what do they like about their jobs? Come along for a journey behind the scenes.
Anke Cornelisse (26) did a traineeship at APG and now works as a portfolio manager.
So you just woke up one day and thought: the world of pensions, that's where I want to work in?
"Ha right, well, not quite. I actually wanted to work in a bank, because my father believes that's reprehensible, which only spurred me on. After an internship at a bank, I discovered that I liked asset management. That's where I discovered the combination of financial markets and economics. So when I started looking for that, I ended up at APG."
And then you got excited?
"Well, not straight away. At the time, the APG site was still rather boring, with photos of women in dull office suits, but I nevertheless decided to look into it further. I saw on LinkedIn that they also employed young people and after I called an APG trainee, I was convinced. It sounded much more interesting than I'd expected."
You were sold and signed up to do a traineeship. Just for the outsiders among us: what exactly does that mean?
"It's a kind of training within the company that lasts two years. You learn a lot in the full spectrum of the field and it's the perfect way of finding a job in asset management as a junior. There are hardly any junior positions available in asset management; everyone working in it already has an awful lot of experience. It's not easy to get a foot in the door when you're fresh out of school. A traineeship is your ticket in. By doing various assignments, you can find out which way of investing suits you and what you like best. Do I prefer to invest in 'fast' stocks and bonds or do I prefer to invest in property or toll roads, which involves you working on a deal more. I was more attracted to stocks and bonds, because they're closely linked to the daily fluctuations in the economy."
So now you have a job as a portfolio manager and you work with bonds. Isn't that the most boring asset class?
"It's true that there's not much return to be achieved now that the interest rates are so low. Bonds are the most risk-free asset class. Our main goal is therefore not to make a lot of money with the money we manage, but to ensure that the actual value of money does not decrease. But it's certainly not boring. It is in fact very dynamic. When something big happens in the world, it's immediately reflected in the bond market. Economics isn't an exact science, it's an ongoing quest for answers. The puzzle is never finished. There are so many factors involved. Just as you're thinking that you're finally starting to get the hang of things, a Covid crisis comes along the effects of which no one can predict. You never stop learning in this profession. You're in the middle of this economy that's constantly on the move."
Which qualities make you a real pension tiger?
"Well I'm very curious, I'm always trying to answer people's questions. I also really enjoy explaining how it all works. What about the coverage ratio? Why should or shouldn't you cut pensions. The people who understand least of it all are also the ones whom it matters to most. I therefore find it extremely important to explain this complex subject matter to my grandparents, for example."
Do you never think: if only I had chosen a bank?
"No, not all, I'm much better off here. Colleagues in the Zuidas district sometimes say condescendingly: "Oh APG, aren't they civil servants?" That just makes me laugh. At least I don't have to work until eleven in the evening like you guys, I'm just saying. At a commercial organization, you actively need to look for clients, that's not necessary at APG. That frees up a lot of room to focus on the content side of things. Instead of making rich individuals even richer, I now invest for the pensions of a quarter of all Dutch people. That motivates me enormously. Even though we don't see or speak to them, we all know whom we're doing it for. We work for the Netherlands plc. That makes me proud."
When I get into the nitty-gritty of things, they quickly lose interest
So what do you actually do in a day?
"I'm on the treasuries team. We invest in government bonds in developed markets such as Europe, America and Australia. Each day, we keep a close eye on the economies in those countries. In the mornings, we go through the relevant market and portfolio developments and check the political news. Are we seeing any crazy things happening in the market? What's going on in politics and what does that mean for our portfolio? Each quarter, we discuss among each other and with insights from external specialists how we view the world, and in particular the countries we invest in. What's our view of the economy and what does that mean for our investments? We use certain models to try to predict what the markets will be doing. Each day, we check whether the portfolios we manage are still in line with what the pension funds have asked of us. We pass on new orders to trading and they carry them out."
Are your friends and family as enthusiastic about your work as you are?
"Uhm, not as much, I'd say. For example, they like it that I can explain how the new pension system works, but when I get into the nitty-gritty of things, they quickly lose interest. That's when they say: 'Anke, I really appreciate you telling me all this, but you don't have to explain it any further'."
We generally don’t think about how we are going to spend our time after we retire, until we’re there. Although some people have been dreaming about a trip around the world, or enjoying just puttering around the house in anticipation of this milestone, most people prefer not to look ahead. Do most people underestimate the consequences of retiring? Experts say they do. “That impact is huge. Make sure you are well-prepared. It doesn’t just happen.”
Your life really does change when you retire. And that is wonderful and a little stressful at the same time. How do you prepare for that?
New life phases go hand in hand with good preparation. Before you started elementary school, you got to spend a few mornings getting used to it, and before you get married, you try out living together to see how it works out. But when it comes to retiring, we often just want to see if we can figure out what we can expect financially. How we will spend our free time is something we’ll decide when the time comes. And that’s a bit late, says Marjoleine Vosselman, psychologist and author of the book Pensioen in zicht (Retirement in sight). “When you retire, you finally get time to do all those things you didn’t get around to during your working life. But sometimes that can be disappointing. How do you deal with all that time, family members’ expectations and possible old age defects? When you stop working, you lose a significant part of what has been giving your life meaning. You will need to make conscious choices and sometimes you also have to accept that not everything is within your reach.”
The transition from an existence in which paid work was the determining factor to a phase of life full of freedom can be interpreted in many ways. Anneroos Gerritsen, senior trainer and advisor at Odyssee discusses this with retirees. On the beach, being active outside or inside. Do we really need preparation or even a course for that? “A retirement course is obviously not the same as learning a new language,” Gerritsen answers. “It’s about becoming aware of what you actually already know. It’s about taking time to think about your next step. What used to be free time becomes new time, or just ‘time’. What do you do with it?” The trainer recommends taking the training a year, or at least a few months, before retirement.
What gets you out of bed in the morning?
“In the course, we discuss five life domains. The first is health of body and mind. What do you already do in this area, think of exercise, and what could you do more or less of? What does your body need, what can it still do? The second domain is social relationships. Soon, the contact with coworkers will fall away. Are there other relationships that you can breathe new life into? Do you want to have more social contacts, or do you have no need for them? And what will it be like living with your partner after you stop working? What kind of space do you allow each other and what do you want to do together?” The material situation is the third domain Gerritsen deals with. “You've arranged your pension by now, and your state pension is coming up. But what about your financial planning, inheritance and gifts and your housing situation? During the course, a financial expert will come as a guest lecturer to cover these topics.” Labor and performance are also discussed. “Course participants still want to do something. But what? And what do you do first? Do you tackle overdue maintenance on your house, take a course or do volunteer work?” The final domain is values and inspiration. “That’s a theme that the course encourages participants to get into together in depth. What is it that still gets you out of bed in the morning? We also have a lot of tips on all these domains in a digital manual.”
What is it that still gets you out of bed in the morning?
Sweat out your work
Psychologist Vosselman is also in favor of a course. She certainly doesn’t see education as a luxury time commitment. “Anyone who thinks that underestimates the impact of the transition to retirement,” she says. In her book, she focuses on meaning and uses personal stories to describe the two extremes of retirement preparation: doing nothing or preparing too much. “Expectations about retiring don’t add up. People are unprepared or even have too much of a planned approach. And yet you want to get off the treadmill of working life. Sweat out your work. Realize that retiring is not just fun. It’s allowed to be difficult. It is this feeling that gives you the space to let go of your working life. Give yourself the chance to change. Prepare yourself without shutting down everything. Gerritsen agrees. “It’s not about ticking items off a list you’ve made in advance. It’s about getting to know yourself again. Couples see retirement as a pink cloud. Now they’re going to enjoy it. Then I ask why they are only doing that now. It turns out it’s the freedom they’re looking forward to. Something singles dread. They are afraid of missing out on structure and coworkers.”
Wrestling with questions
One of Gerritsen’s course participants was Joep Athmer, a former board member at dredging and maritime construction company Van Oord. For his work he regularly traveled to distant destinations. At age 62, with a great career behind him, he was thinking about the time after he retired. He had all kinds of practical questions: “Should I stay home and putter? Should I go cycling? Or look after the grandchildren full time?” But he also had deeper questions like, “Will I still matter when I no longer have the charisma of my job? What am I worth at home? What will it be like to be at home with my wife all the time?”
So, Athmer and his wife took the retirement course at Odyssee. “If we wanted to continue having a good life together, that course was welcome. And it proved to be so.” Athmer was glad to see that he was not the only one with questions. Plenty of other men and women in leadership positions were wrestling with the question of whether they would still matter in that phase of life.
“The answer to that question is: yes. This course got me thinking and that went beyond thinking about where we want to travel. I gained insight into who I am and what my wife and I both want.” Meanwhile, Athmer, now that he is retired, has five side jobs and he sits on the board of several foundations. But he also tours the Faroe Islands on his motorcycle. And he has a bunch of other beautiful trips on his bucket list.
Sense of futility
The biggest impact that retirement has is psychological. People who have just retired lack the context of working life. The tragicomedy About Schmidt with Jack Nicholson illustrates this perfectly, Vosselman believes. “The movie shows how the retired Warren Schmidt is overwhelmed by a sense of futility.” According to Vosselman, we often hang our identity and value on our work. “Those who work have challenges in many areas, are expected somewhere and have a (full) agenda. Work gets priority, work is urgent. When you stop working, you have to make sure you’re still expected somewhere.” The psychologist strongly emphasizes that the bar need not be set too high. “Even something relatively small, like signing up for a drawing course is good. Just get out of the performance atmosphere of work.”
Should I stay home and putter?
Saying goodbye helps
And she means that literally. After all, research shows that saying goodbye is beneficial and can really make a difference. “Transition requires a ritual. It helps you close the door to the old and open it to the new,” says Vosselman. And in her view, employers and coworkers play a big role in this since the person retiring usually modestly exclaims that a farewell party is unnecessary. “During corona, saying goodbye is harder, so be creative. It’s very important to close your working life and hear how meaningful you were. It is precisely after a good farewell that you can move forward.”
If you choose to just let retirement happen, it carries risks. “You may be looking forward to the peace and quiet,” says Vosselman, “but empty, meaningless days can also cause a lot of anxiety. Or maybe your days will be filled automatically by babysitting the grandchildren. But is that what you really want? And what will it be like at home when one partner is working and the other one isn’t? Take time to explore that.”
Retirement courses, by the way, are not a fad. The idea originated sixty years ago at Hoogovens, the current Tata Steel, in IJmuiden. Gerritsen: “At that time it was a real family business where employees started as fifteen-year-olds and stayed until they retired. Until, for the first time in history, people had to be laid off in the 1960s.” That went against the tradition that Hoogovens had. And the company did not want to just throw people out on the street. A social plan was drawn up and the precursors of Odyssee facilitated the transition to not working. Gerritsen: “That offer was supposed to be a one-off. But everyone liked it so much that the initiative has remained. And we’re seeing that more and more employers are taking responsibility and offering a Pension in Focus course. Companies like Philips and Heineken, as well as the government, are making sure that their employees can have a positive experience both when they start working and when they stop working.”
“Swiss life feeling” is unfair
Will we end up in a black hole if we don’t make preparations? Vosselman says we won’t. She thinks the dreaded black hole is a vision of doom that fits in with the spirit of the times, where we should all be happy. “That Swiss life feeling can instill unnecessary fear. It’s not a fair picture. You get older, appear more vulnerable. Then not everything is possible anymore.” The psychologist predicts a black hole only if you’re afraid to go through that transition process. “Suppose you’ve always been a doer, but around retirement your body gives out. That is very difficult. Then you have to reinvent yourself.”
Next time: Retirement in sight - Does the black hole exist?
Retiree Joep Athmer ended up in the dreaded pension hole despite a retirement course. “With a job like I had, you just keep growing. At some point you think you’re Jesus and can walk on water. But that’s dangerous. You think you’re untouchable, but when you retire, suddenly everything is gone.”
“Unclear” is the verdict of international experts regarding the new Dutch pension system. Onno Steenbeek, Professor of Pension Management at Erasmus School of Economics and Managing Director of Strategic Portfolio Advice at APG Asset Management, researches pension reforms abroad. Discussions with colleagues in ten countries, including Canada, Denmark and the United Kingdom, taught him two things. The way in which the Netherlands is reforming the system is unique in the world. But the road to it must be explained transparently and clearly. “Nobody understands why we bother participants with discussions about the discount rate.”
The pension think tank Netspar asked Steenbeek to take the lead in this so-called topicality project. Steenbeek, who, in addition to his work at APG, is also a professor at Erasmus University, sought to collaborate with former chairman of PMT pension administrator Benne van Popta. Steenbeek and Van Popta consulted with colleagues in various countries that have recently undergone substantial reforms of their systems.
Lost a lot of money
Steenbeek: “Canada is often taken as a comparison. It’s a country that’s very close to the Netherlands: they have accrued substantial pension assets that are managed collectively. We can also learn from the way they deal with the self-employed. Countries like Chile and Australia have a lot of experience with defined contribution plans (in a defined contribution plan, the pension contribution is fixed and no firm promise is made about the amount of the benefit upon retirement, ed.) We will be able to learn a lot from them once we switch over to the new system, including what not to do. That also applies to the United Kingdom and the United States. In the UK, for example, we have seen that the option for participants to withdraw their entire pension capital at once has led to undesirable results. Many participants withdrew their entire pension and took it to a commercial assets manager. In this way, they lost a lot of money at great expense. In Chile, many people switched to another administrator because they were given a bicycle. Of course, motivation like that is highly questionable. But in Denmark - where participants were individually asked for permission to switch to a new system - that freedom of choice contributed greatly to the acceptance of the new system.”
Endless discussions to find a solution
What surprised Steenbeek most of all: the transformation that the Netherlands has opted for is simply impossible abroad. In the Dutch plans, we will convert a promise of the amount of the benefits upon retirement (defined benefit plan) into a pot of money that, depending on the financial markets, will provide an uncertain pension benefit in the future (defined contribution plan). This is a complex operation, but according to Steenbeek, that is not the main reason why people abroad do not choose this route. “Most countries allow the old and new systems to continue to exist side by side, because there is no other option. The old system then ends up slowly disappearing. That is far from efficient, because two systems will then continue to exist side by side for a very long time. And that not only increases the costs, it also means a fund will not be able to take as much investment risk in the long term. Ultimately, this is simply at the expense of the amount of the pensions. Unlike in the Netherlands, participants in Anglo-Saxon countries in particular have a financial contract with the fund that cannot simply be changed into something else. The moment you convert their pension rights into pension capital, they’d go to court. It’s different in our country, because we have a social contract with each other. All parties sit down together and sooner or later work out a solution. That will certainly work, but the foreigners are calling on us to do that as transparently as possible.”
In Chile, many people switched to another administrator because they were given a bicycle
We saw that those discussions can be endless when the new pension agreement was drawn up in 2020. The entire process took more than ten years, and that too has not gone unnoticed abroad. But, says Steenbeek, the question is whether that is a bad thing. “I can understand why people sometimes say that we talk a lot and don’t get much done, but there are few countries that can tackle such a radical and complex reform easily. It is difficult to get the population on board if you do it too quickly. If you want to explain clearly what you are doing and think through carefully what you want to achieve and why, you need time. Moreover, it's not like we're going from an old system to a new one instantly. We had to get used to the uncertainties in the current contract and we have already adjusted the plan in many ways over the past twenty years. So, you can see this as the next big step in an evolution.”
Hard to explain
Another important point that was pointed out to Steenbeek by foreign experts is how to explain the Dutch pension reform. “I noticed that it was difficult to explain where we come from and where we are going with the Dutch system. Some people said, ‘you say that in the current system there was a promise about the amount of the benefit at retirement, but is that really the case?’ And there’s something to be said for that, in the sense that even in the current system, the pension promise is not rock-solid. After all, pensions can only grow in line with current wages if a fund’s financial position allows it. And a number of funds even had to cut their pension benefits. We seem to have forgotten that, because for years there has been no need to cut pensions or to forego adjustment to wage trends.”
People in other countries weren’t immediately sure what to think of the new pension contract either. “Then we'd tell them that we’re going to a defined contribution system, but with collective elements. So, it is not a defined contribution system in the purest sense. But these people did not necessarily take all the aspects we mentioned seriously."
“In the Netherlands, we have a very strong tendency to talk in incomprehensible jargon”
One piece of advice we got from our foreign colleagues was to be crystal clear about where you are coming from, where you are going and why that is good for the individual participant and for society. That’s a wide-open door, isn’t it? “Of course, but it is still good to be explicitly reminded of that from abroad. In the Netherlands we have a strong tendency to talk in incomprehensible jargon. A word like ‘coverage ratio’ is not used at all abroad, and they don’t understand at all that we bother the participants with discussions about the discount rate. The idea of a ‘parameters committee’ - which I was a member of - that determines returns and risks in pension supervision, was hilarious to them. Apparently, we are not yet sufficiently aware of this. But the transition to the new system can only succeed if it is fully explainable and transparent in terms of what exactly we are going to do, how we are going to do it and why.”
The tricky part
The conversion of the accrued pension rights into pension accounts is the trickiest part of the transition to the new system. Steenbeek: “Foreign experts consider this to be the crucial part as well. If it works, the rest will work too. And then you can’t go back. You have to design and explain the operation in such a way that people see that it is done in an honest and fair way. A British colleague emphasized this more than once: if you do it in such a way that it is difficult to understand, then it is very likely to be very difficult to accept. I hope we’ll be able to do that: explain it clearly. We have to keep our eye on the big picture of what we are doing and not get lost in too many technical details.”
Transparency and explainability seem to be the name of the game when it comes to succeeding in this feat. “If we are open and honest, it will land. It just has to succeed, because there is no plan B,” Steenbeek says.
And if it doesn’t land? “Then we will have lost confidence permanently, I’m afraid.”
This interview is based on a first impression of the advice Steenbeek and Van Popta collected abroad. The final research results are expected by the summer.
Imagine being responsible for the paragraph on pensions in an election platform. After more than a decade of pushing and pulling in the polders, a detailed pension agreement is now in place. The Ministry of Social Affairs and Employment hurriedly published a corresponding series of detailed legislative proposals for consultation just before Christmas. What on earth is there to write about pensions at this point that could still score a political point?
To answer this question, we examined 14 draft election platforms. Three themes stand out with regard to funded/second-pillar pensions, on which (almost) the entire political spectrum has included something.
Starting with the proposed pension system. The current outgoing coalition parties, VVD, CDA, D66 and CU, are carrying the noise of the pension agreement. This was to be expected, of course. We also know that the PvdA and GL have endorsed the pension agreement, although GL makes no mention of the agreement and its contents in its program. These six parties alone represent more than two-thirds of the seats in Parliament in the polls.¹ Support for the new system thus seems assured for the coming term of office.
The theme of freedom of choice is seized upon by all parties - with the exception of CU and DENK - to raise their profile. With regard to second-pillar pensions, D66 and VVD both argue for pension premium vacations for employees, so that they can use them for their own homes, for example. This fits in with the parties’ reasoning, which is primarily based on the individual. It is also a convenient way for these parties to continue to push for further individualization, without dismissing the pension agreement. At the same time, it clashes with our collective system, which is grafted onto paternalism.
Finally, the topic of pension accrual by self-employed individuals. This is a classic theme that attracts a great deal of attention, but one on which there are (very) diverse views as to possible solutions. It is a theme that was also discussed extensively, but with little result, in the context of the pension agreement, and on which - apart from the Labor Party, which proposes a general pension obligation for all workers - most parties do not seem to want to burn their fingers. Pension accrual by self-employed individuals will be discussed at length in the cabinet formation as part of an integral vision of the labor market (balance flex / permanent).
The originality/consolation prize - depending on your political preference - goes to Forum voor Democratie, who are the only ones to propose a fundamentally alternative pension system with ultimate freedom of choice for all workers and no obligations for self-employed workers. In their ideal world, second-pillar pensions would be managed by “experts rather than social partners”, there would be more freedom of investment with less strict supervision by the Dutch Central Bank, a higher actuarial interest rate, and all of this would be based on voluntary participation in pension plans.
It is also interesting to consider what is not included in the election platforms. Subjects such as taxation, the calling into question of compulsory insurance and geographical investment rules are, with a few exceptions, not found in any of the platforms. On the one hand, this is striking, given that several of these topics were (prominently) mentioned in previous elections and/or were part of the public debate in the past cabinet term. On the other hand, with the conclusion of the pension agreement in outline form from 2019, and the agreement on its elaboration from 2020, a lot of political attention has already been given to the new system. Political parties have, probably for that reason, mainly profiled themselves as for or against the new system, rather than addressing “new”, potentially divisive topics.
Thus, despite the pension agreement and the resulting legislation, the subject of pensions has certainly not turned out to be an underdog in the current election programs. Quite the contrary, in fact. If not paragraphs, then entire chapters have been devoted to pensions by program committees.
At the same time, in the end, it is not so much about the programs, but about what will ultimately be in the new coalition agreement. At least three, and possibly more, parties will be needed for a majority after the elections. And those parties all want something different. The chance of quartets being formed is therefore very real. As a result, political parties’ wishes that were not included in the election platforms could end up in the next coalition agreement.
Or in other words, despite the high level of support for the pension agreement that can be inferred from the election platforms, our pension system is not a peaceful asset. Certainly not after March 17, when the formation begins.
Nick van de Sande – Korpershoek
Strategic policy officer
If people want to make better financial choices, they need to get a grip on their financial affairs earlier and more often, say Paulien van Gurp and Henk-Jan Boersma from Prikkl. APG took a 40 per cent interest in the financial coaching and advice platform today. Both share the same mission of removing the barriers to financial insight. Sounds great, but a bit abstract. How do you do that exactly?
It’s one of the goals that APG sets itself: making people in the Netherlands ‘financially fitter’. In other words, helping people get a good grip on their financial affairs so they can make informed choices. APG has been achieving this by developing various initiatives and tools to support APG affiliated pension fund employers and participants. The partnership with Prikkl is the most recent addition to this armory. Prikkl has been helping companies ensure their employees financial ‘agility’ since 2017, via a combination of software and personal advice. Chris Veerkamp is involved in the partnership as business owner from AGP: “We share the conviction that every person in the Netherlands is entitled to accessible and affordable financial coaching. And we want to encourage people to use this.”
Where does this “urge to encourage” come from? Don’t people simply seek advice if they need it?
“That’s exactly the point. The barrier is too high for many people. It’s too expensive, or too much work, the result being that they often seek financial help too late. If you only seek help when it’s become a real emergency, the options are very limited. People only talk to the bank if they’re actually going to buy a house and only start investigating early retirement if they don’t feel like working anymore and state retirement age is approaching. But they’d be much better off thinking about this when they’re forty, when they can still do something about it,” replies Boersma.
Veerkamp adds: “And ‘doing something’ means making choices. The introduction of the new pension system is making these choices even more important. It will make pension levels less certain and people will need to know the potential impact of their choices in time. Buying a house, early retirement... How will these affect your finances and income now and later?”
And Prikkl and APG will be helping with this?
“Of course, that’s the aim. We want to make sure that we can offer services to pension participants at the moment that their finances play an important role; give them the right information at the right time. This means offering quick support that’s tailored to people’s circumstances instead immediately coming up with a complete financial plan. We want to help people make financial choices in their lives or careers; preferably before these choices come up,” says Veerkamp.
Isn’t it difficult to anticipate these choices?
“Of course, and that’s where the challenge lies,” says Veerkamp. “On the other hand, as APG we know from experience which problems can arise, which choices people will make, and what impact these can have on their pensions. Through our funds, we have a lot of contact with clients every day. This means we hear what’s important to people and employers, including with respect to finances. We should be able to use this more so that we can facilitate and help people.”
“And a lot of behavior can be predicted. It’s something you can anticipate,” replies Boersma. “A good example is first-time buyers on the housing market. All they hear about is how low their chances of buying a house are. That may make them abandon the idea. When a first-time buyer starts working for an employer, we can chat to them while the contract’s being drawn up. We can then make a quick calculation of their potential maximum mortgage so they can see whether they’re likely to be eligible to buy a home. This gives people the chance to consider options they wouldn’t normally have thought of.”
Van Gurp continues: “That’s also the core of our approach. We first look at someone’s financial situation and use this to decide which solution or approach is appropriate.”
Do you only focus on employees and employers?
“In principle, yes,” answers Van Gurp. “The employer is an important and reliable link in helping employees with their financial affairs and encouraging them to take action. We don’t target self-employed persons and freelancers, although we do of course help people who are considering starting for themselves. Who knows? Perhaps we’ll focus on the self-employed and freelancers in the future.”
APG also offers other services aimed at financial fitness, such as Kandoor and Geldvinder. What do Prikkl’s services add to this?
Veerkamp adds: “The services we offer as a ‘trusted guide’ for employers and employees are still very application and platform-driven; they’re largely only online tools. Prikkl combines advice software with personal support from a financial advisor. Moreover, Prikkl focuses on financial coaching and advice across the board – not just on pensions. We can also learn a lot from this. Partnerships with parties outside of APG mean that we don’t need to do everything ourselves to be a trusted guide for employers and participants. It is, however, important that these services enhance each other. They should be a sum of their parts.”
What are the next steps in the partnership?
“We’re going in two directions. We’re investigating how we can make optimum use of Prikkl’s current service for employers and employees of APG's affiliated pension funds. And we’ll also be investigating the development of two new propositions in the coming months. These are new ways to combine Prikkl’s knowledge and services with what we do at APG,” says Veerkamp.
When will you be satisfied?
“When we can really ensure that improved financial insight is accessible to a large audience,” says Van Gurp. “And when we manage to reach people earlier on a large scale. We can then help them before they get into financial difficulties or before their choices become limited. As far as finances are concerned, I want to prevent that someone thinks, if only I’d....”
Boersma adds: “I’d be happy if people start seeking help with their financial affairs as a matter of course. It doesn’t need to be something you enjoy, but it should be just as regular a routine as a dentist appointment. Just go and see them once or twice a year. And we’ll be there, ready and willing to help.”
How do you deal with work and money for now and in the future? Do you live from day to day or are you deliberately planning your financial future? And do you arrange ‘later’ yourself or are you a member of a pension fund?
Marielle van Ramshorst works as a manager at a location organizing daily activities, is the owner of a dance school and a trainer.
Marielle van Ramshorst (35)
Profession: manager at a location organizing daily activities, dance teacher and trainer/coach
Weekly works: more than 40 hours (in non-corona times)
Income: between 1875 and 4375 euro per month
Savings: 13,000 euro
Pension is arranged? Partly
How did you arrange your pension?
“I am a member of a pension fund through my employer. In addition, I have created a pension pot on my savings account. That account holds some funds, but I have not yet delved into the purpose of that money.”
What kind of work do you do?
“I manage the team working at a location organizing daily activities for people who, for any reason, are unable to perform paid work. Besides that, I am the owner of a salsa dance school where I also teach lessons and I started working last year as an independent trainer and coach. In that latter capacity, I help single women looking for a relationship to find out why they are still single. I met a lot of ladies at the dance school struggling with questions in that area and that’s how the idea was born. I use plenty of movement during my trainings because that’s the way to experience and feel things differently than if you would only look at it rationally.”
So, you started your coaching business in times of corona?
“That’s correct and it’s not the most ideal time. I was only able to finish one training in full so far. The next one was scheduled for January, 2021, but we had to postpone that training as a result of the corona restrictions.”
How many hours do you work a week?
“Twenty hours per week at the location organizing daily activities. Usually about twenty hours per week at the salsa dance school as well, but that work has come to a standstill due to corona. I spend approximately four hours per week on the training and coaching activities and a bit more when a training is about to happen. My goal is to provide a training once every three months.”
That is more than fulltime.
“Yes, but it doesn’t really feel like work. I work long hours, but a large part of it involves a hobby that got out of hand.”
How much do you earn?
“Around 1875 euro net per month at the location organizing daily activities. My income varies somewhat at the dance school. At the moment, I earn approximately 300 euro per month which used to be around 1000 euro per month. A training earns me between 1000 and 1500 euro, depending on the number of participants.”
Are you satisfied with that income?
“Yes, it’s enough to make ends meet. I believe it should be possible to earn more money offering coaching, but it’s a difficult time for those activities right now. Of course, you earn a lot less having three participants in your training instead of allowing twenty people to join.”
How much do you pay on fixed costs?
“Around 1400 euro if I add up my mortgage, electricity, internet and insurances.”
What else do you spend your money on?
“Spotify, Netflix, that kind of things. My girlfriends and I also have a pot for ‘fun things’ in which we deposit 20 euro per month. We organize something fun to do when that account holds enough funds. A day to the sauna or a wellness resort for example, with an overnight stay in a cottage surrounded by nature and great food. It feels good to have already saved that money, so you no longer miss it.”
How much money do you have on your own savings account?
“Around 13,000 euro. That really makes me happy, I never had that much money saved before. I probably still have to pay a large part of it to the tax authorities though.”
Do you think about your old age often?
“Not really. I realize things have to be arranged, but I always worked a lot more hours in paid employment previously and never had to worry about my pension. The topic is discussed sometimes in the business club I meet once a month. Expressions such as ‘pension gap’ and ‘annual margin’ are uttered which makes me think: Well, that’s really interesting, but I don’t put my thoughts into action. I really have to start making arrangements this year.”
How much pension would you receive on a monthly basis should you be 67 years old now?
“Good question, not a lot I presume. I always quickly put aside the letters I receive on that topic. Wait, I will get one of those letters… Right, I have been accruing pension since 2002 and the statement says I will receive a gross amount of 18,000 annually. I believe my annual income is much higher right now, so it doesn’t sound as if that payment allows me to do plenty of fun stuff. It also doesn’t frighten me because I didn’t expect it to be a huge amount. This amount will not be enough to make ends meet, but I have hopefully paid off my mortgage by then which makes a bit of a difference. And I will also receive a state’s pension (AOW) of course.”
What could be arranged better?
“I still have to arrange a pension plan for my own business. I want to find out the options that are available. What is a wise thing to do in my situation, being partly in paid employment and partly self-employed? I really have to delve into the topic much more.”
A man who can do everything himself. Not the ideal image I expect to ever achieve. It’s a question of brothers who are handier. They were the ones who used to fix everything around the house. And so, they deprived me of the chance – I mean motivation, of course – to learn how to do things with my hands. These days, when a kitchen cupboard squeaks, I call a handyman.
This seems to go completely against the spirit of the times. Self-sufficiency is popular these days. Homeowners prefer to generate their own electricity, among young people there are those who want to arrange their own (early) retirement and many dream of their own vegetable garden. By going off the grid, you limit your dependence on others, is the underlying though. It also plays out on a national level: shouldn’t you be in charge of your own medicine and face mask? Let’s build up reserves so we won’t be at the mercy of the IMF.
It’s not just a romantic desire. There is an economic basis. Consumers value a cabinet they have screwed together themselves more than an off-the-shelf one (known in the literature as the IKEA effect). Doing it yourself feels good! It is also a logical reaction to the financial crisis, Euro crisis and corona crisis to want to build a buffer. That cuts down on dependence on others, right?
There are some snags in this reasoning. Doing everything yourself is not efficient. If the handyman solves my problems and I solve his, we’ll probably be done twice as fast with a better result. In short, you get more out of your time if you use it efficiently. Another point is that building buffers seems to make you more resilient as a country or individual, but it creates new dependencies.
Here's the thing. I can only save if someone else is willing to take on a debt. The same is true for countries. All global trade surpluses – let’s call it national savings - added together are by definition equal to all trade deficits. One country saves, another borrows. In short, it doesn’t mean that building buffers makes the system more stable. Not every country can be owner of securities. If the debtors collapse, so do the buffers. The “law of maintaining misery” is what my physics teacher used to call it.
It also shows that independence is an illusion. If I’m sitting on a big bag of saving, that actually makes me dependent on others. They will have to accept my money in exchange for goods or services in the future. Maybe they won’t. If everyone decides to retire at the same time so they can enjoy gardening, there will be no one to deliver meals or fix a kitchen door.
Now, in practice, of course, it will not turn out so extreme, but it indicates that in economics no man is an island either. Our wealth is based precisely on close cooperation with strangers. Perhaps capitalism has made us more individualistic, but certainly not more independent. In fact, the term “economic independence” is internally contradictory.
Of course, I’m not saying buffers are useless, just that you shouldn’t be blinded by them. Investing in social capital can also be very rewarding. And if worst comes to worst and you don’t have the money for a handyman, there might be a neighbor who’s willing to help. Or a handy brother, of course.
Charles Kalshoven is a senior strategist at APG
Work till you’re 67 and then enjoy your retirement. Or could it be different? A search for Plan P: innovative ideas and alternative scenarios for organizing your life, work and retirement. Rethinking for and by young and old.
In this edition, Millennials Saska van Engen and Puck Landewé speak about financial independence and early retirement.
December 31, 2025 is D-day for Saska van Engen (30). That is the date on which she wants to have saved and invested enough to be able to say goodbye to her steady job. A job she likes, incidentally, but freedom beckons. “If I want to go for a walk then, one of my passions, on a Tuesday morning, I want to be able to just do that.” And she has a dream: to live in the forest in Sweden and really enjoy nature, far away from the rat race.
Puck Landewé (33), thinks she will be financially independent in about a year and be able to live on the revenue from her investment portfolio. For her, freedom is a keyword too. “I want to be able to follow my heart, even if it doesn’t pay much or at all. I’d like to be a forester someday.”
Open-plan office or your own garden?
Van Engen and Landewé are both supporters of the FIRE philosophy, which stands for: Financial Independence, Retire Early. In other words: become financially independent, so that you can retire before you’re even forty, instead of waiting till you’re 67. Or so you don’t have to sit in front of a computer screen in open-plan office, but instead have more time for your own garden, traveling or your own enterprise. That freedom must be bought with striving for financial independence: spend less than is coming in and invest the difference, so that you can eventually live on the returns and the dividend.
From dealing room to beeswax candles
After earning two master’s degrees in economy and finance, Van Engen worked at audit firm EY and ABN Amro’s dealing room, as a risk controller. “I quickly realized that I was not really attracted to that world after all: too hard, not people-oriented enough and I missed social relevance.” At the beginning of this year, she became a business controller at healthcare facility Beweging 3.0. “In the care sector there is less back-room politics and competition: you’re working together to help other people. That’s a much better fit for me.”
In addition to her job, she has a company that makes beeswax candles, she has a hiking blog and a website where she gives advice and blogs about consciously dealing with finances and investments: FinanceMonkey.nl, with about 22,000 followers a month. The latter activity provides her with extra income and contributes to her ultimate goal: to be financially independent at age 35, along with her boyfriend. “Then we can trade our nine-to-five jobs in for freedom to live differently, with more time for ourselves and for helping others in society.”
Landewé worked for Wehkamp, then for VodafoneZiggo and then for listed bicycle manufacturer Accell Group as a brand and communication manager, after her education in fashion. She quit her job at the end of last year. It was a turning point. “My mother was seriously ill and died, my relationship ended, and I got mono. That’s when I started to think: how can I get more peace in my life?”
She took an Eat Pray Love sabbatical, lived in Rome for a while and started the platform Fireforwomen.com: 27,000 followers monthly and 1,400 community members. Landewé now has three women working for her and makes good money with her website, where she wants to help Dutch women become more financially savvy. There is a great need for that, she says. “Even my highly educated friends responded very reluctantly to my FIRE plans: ‘Isn’t investing on your own very risky?’ My answer is: not if you know what you’re doing and you do it in a smart way. The media also has a stigmatizing effect: personal finance articles for men are often about accumulating capital; the same articles for women are mostly about saving opportunities. Apparently, investing for and by women is still a taboo; one which I want to break.”
Be careful with every Euro
Saving and investing the money you have left in a smart way: you need both for financial independence. Van Engen and her boyfriend put half of their income aside every month. “We made some conscious decisions: we don’t drive a car, we moved outside of the Randstad, and we are careful about how much we spend at the supermarket ... we literally watch every penny.”
99 Percent of the saved money is invested: through index funds and pension investors. But what if the stock market crashes? Would the millennials chasing FIRE be left without a decent pension later in life? That fear is unfounded, according to Van Engen. “I’m only 30. In the beginning you can take bigger risks and focus mostly on shares for the returns and the dividend. As you get closer to retirement age, you can take less risk and, for example, get more into bonds. Pension administrators do the same thing.” Van Engen also points out the importance of a good savings buffer and nerves of steel. “When things slow down, don’t sell in a panic, but keep a cool head. The stock market will pick up again. The coronavirus crisis has shown that again.”
Creating financial freedom
Stick to the plan, Landewé agrees. She also does index and pension investments, but she also invests in real estate: last year she bought her first investment property. With the profit from the sale of her house (she is going to rent) she wants to buy a few more houses. Make sure you have a buffer and watch your spending pattern, Landewé says too. But she does want to eat well and doesn’t want to live too austerely. She puts the emphasis more on earning: through a lucrative side-business or by working more and negotiating better about your salary. “The Netherlands is a champion of working part-time. Many women are financially dependent on their partners; we have a gender pay gap. If women start to earn more, they can strengthen their financial position and accrue capital.” There is nothing elitist or spoiled about that, as critics of the FIRE movement claim, according to Landewé. “I, too, was born into a nice family and enjoyed a good education. I am absolutely privileged. Unfortunately, there are people in the Netherlands who aren’t as lucky and for whom financial independence will not be feasible. On the other hand, I am convinced that, in many cases, people have many more possibilities when it comes to improving their position than they initially believe. Even if you have only ten Euros left to invest at the end of the month, you can take control and create more financial freedom for the long term.”
Millennials want to take care of their own pensions …
The Dutch pension system is its own reason to strive for FIRE. “I am assuming there is not going to be any Old Age Pension for me and maybe no pension at all for my generation,” Van Engen says. “Due to the ageing population and the large number of people in their fifties who will soon reach retirement age, the gap between what is collected in contributions to the state pension scheme and the money that has to be paid out will increase. At present, this is still supplemented by other tax revenues, but if the discrepancy continues to widen, this may no longer be feasible. So, there is a good chance that the system will have to be turned upside down in the future, because it has become too expensive and can no longer be afforded. That is not fair to me or other millennials, but it’s better to be pragmatic and build up your pension independently.” Through her employer, Van Engen is connected to an industry-wide pension fund and in addition she does pension investments to use the entire fiscal year. “I’d rather do it all myself. Unfortunately, that is not possible in the Netherlands.”
But doesn't the collective pension system ultimately create the most value for everyone, regardless of age? As a representative of the millennial generation, Van Engen doesn't agree with this. She thinks the new pension system is a step in the right direction. “But ultimately, it should really be individual pension pots. Now, in years of prosperity, the investment returns of non-pensioners can be skimmed off in favor of pensioners, so that the pension fund can meet its obligations in years that are not as prosperous and will not have to compensate for this. To make up for this shift for non-pensioners, a higher return must be achieved on the long-term liabilities by running more risk. However, the upshot of this is that the minimum funding level will rise again. So, there is a vicious circle, which can be broken by opting for individual pension pots instead of a single, collective one.”
… and make more sustainable investments
Landewé also asked every employer if she could organize her own pension, but to no avail. “Millennials want to be in charge themselves.” Plus, she thinks the current pension system is not accessible, not flexible and not transparent. “You deposit a few hundred Euros a month through the pension premium, but you don't know where that is being invested. That didn’t feel good. Now I can decide for myself what happens to my pension money, choose my own risk profile and invest more sustainably. My generation doesn’t want Shell or Tata Steel shares anymore; we want a better world.”
Puttering around in the vegetable garden at your cottage in the Swedish woods. Having the luxury of not sitting down with your laptop on Tuesday mornings but going for a nice walk instead. Taking a forestry course or finally opening that pop-up restaurant. These are just a few of people’s dreams about their retirement. Only these are not the dreams of people in their sixties, but of people in their twenties and thirties: Rowan (27), Saska (30) and Puck (33). And they don't want to make those dreams a reality after age 67, but preferably before age 40 or even earlier. Elsewhere in APG Newsroom, we asked these millennials to talk to us about their outlook on life and how they are funding their early retirement.
Feasible and desirable?
The FIRE philosophy (Financial Independence, Retire Early) plays an important role in this: achieving financial independence as early as possible in life by living (frugally) on the returns from your investment portfolio. That sounds nice, but is it also feasible and socially desirable? We asked Charles Kalshoven, Thijs Knaap and Eduard Ponds, all three of whom work at APG for the Asset Management department, which is responsible for investing 560 billion Euros worth of pension money (as of November 2020) for 4.7 million participants through the affiliated funds. It led to five caveats (but also two benefits).
Caveat 1: Professional investors achieve more returns
FIRE-adept people put as much of their income aside for investing, sometimes as much as half. Can young people build up enough pension capital independently for their early retirement? Charles Kalshoven: “People increasingly want to be self-sufficient and independent; this is a trend in society. They want solar panels to provide their own energy and increasingly, they also want to arrange their own pensions. But as an individual investor, you’ll never be able to equal the results and risk-spreading of a professional party. As APG, we can use a good mix of, for example, shares, real estate and long-term investments in infrastructure, with which we also contribute to society.”
Eduard Ponds, who, in addition to his position at APG, is a special professor of Economics of Collective Pensions at Tilburg University: “Time and again, research shows that professional investors achieve better results than individual investors.”
Caveat 2: Individual pension investors carry longevity risk themselves
The FIRE supporters themselves, incidentally, think differently. They often assume an expected return (including dividends) of at least 7% on their investment portfolio. Four percent to live on, 3% for inflation adjustment. “The expected return on equities and especially bonds is no longer as high as it used to be,” warns Kalshoven. “We are noticing that at APG ourselves,” adds coworker Thijs Knaap. “So, if you’re counting on an average 7% return, you might be a bit too optimistic after all.”
Moreover, FIRE supporters run the risk of still having some life left to live when their retirement capital runs out, Ponds calculates. “If you take 4% out of your retirement capital and have an investment policy of 50% stocks and 50% bonds, you probably won’t go broke for the next 30 years. But after that, it becomes critical as life expectancy keeps increasing, to a hundred years or more.” Pension funds absorb that longevity risk with collective reserves. Knaap: “People can receive pensions for as long as they live, because you can draw on a larger pension pot and not everyone lives to be that old. If you retire at forty and live to be a hundred, you run the risk of not saving enough for those sixty years.”
Caveat 3: If the stock market crashes, you’ll be without (sufficient) retirement capital
In the spring of 2020, a third of stock market value was lost due to the corona crisis. In 2008, we experienced a financial crisis. Kalshoven: “If you are an independent investor and you experience a stock market crash, or you have invested in a company that goes bankrupt, you could see your assets, and therefore your pension, go up in smoke.” Individual investors sometimes make the wrong decisions in a stock market crash, Knaap tells us, such as selling shares at the market's lowest point or taking irresponsible risks. “If you have saved tons yourself and half of it evaporates, it also causes a lot of stress and you sleep badly.” A professional investor like APG also suffers from this slumping stock market, Knaap acknowledges, but does not panic and can absorb and compensate for temporary losses more easily.
Caveat 4: Managing your retirement capital yourself is hard work
Particularly in a crisis, people often lack the knowledge and experience to invest their retirement money themselves, says Ponds. Most people don’t want to do that either, he says. “They think it’s important for their employer to offer a good pension plan, but they’re not interested in the details, research has shown.” It’s also just a lot of work to invest your capital as effectively and sustainably as possible at the lowest possible cost and acceptable risk, Knaap argues. “We have a day job doing that at APG with about a thousand colleagues. So, we look at supporters of FIRE like the construction worker looks at the do-it-yourself enthusiast: maybe some people can invest for their own retirement, but why would they want to? Actually, you’re still not free; you just have an additional new job.”
Caveat 5: Society will come to a halt due to too many people retiring early
So, these three APG employees have some reservations about the FIRE philosophy. Not to mention the fact that early retirees voluntarily forgo their greatest earning potential - after age 40 - and the joy, identity and self-actualization that work can bring. “You invest too little in education, experience and networking to take full advantage of your accumulated human capital later in your career,” Kalshoven says.
Their greatest reservations, however, lie in the social sphere. “If we all retire at forty, who will serve the espressos on the terrace, cut your hair and teach your children?” laughs Knaap. Ponds is more adamant: “We need to watch out for a generation of free riders, drop-outs who make no contribution to society but who make use of the infrastructure and care services, for example. If there are too few working people left, we will no longer be able to finance those collective facilities and our society will collapse.”
Still, the three APG employees do see some positive points in the desire of many millennials to structure their lives, work and retirement differently than their parents:
Benefit 1: Fantastic! People in their twenties and thirties are finally showing an interest in their retirement…
“Most people under forty are not concerned with their pensions and often don’t even bother to open their UPO, their Uniform Pension Statement,” Knaap sighs, while his two coworkers nod in agreement. “To most young people it’s a deadly dull, technical and complicated subject. These people in their twenties and thirties are looking into their pensions, and that’s a big plus.”
Benefit 2: … and they’re taking financial control of their lives: even better!
Followers of the FIRE philosophy live frugally, save a lot and look ahead. Knaap again acts as spokesperson: “These millennials are taking financial control of their lives and are self-reliant: an enormously positive development. They don’t need an expensive car because the neighbor has one, or a top mortgage. If people borrow less and have more buffers, we, as a society, will be able to absorb economic shocks better.”
Could APG perhaps meet FIRE supporters and other millennials halfway, for example, by making part of the pension balance withdrawable for a sabbatical or mortgage payment? By abolishing mandatory pension accrual through employer and pension provider, like they do in other countries? Or by exchanging the collective pension pot for individual pension pots?
A lot of hard thinking is going on at APG about pension innovation to better reflect different preferences in society, is the unanimous response. Ponds: “We're eager to learn from the younger generation.” Moreover, the new pension contract is already putting more emphasis on people’s own responsibility and a shift towards more individual pension assets. “It’s starting to look more and more like an ordinary bank account,” says Knaap. But it takes time to adapt a pension system that has been developed over the past 100 years. We must also preserve what is good about it - principles such as solidarity, risk-sharing and compulsory membership - the APG people believe. Kalshoven: “Millennials may experience that as paternalistic, but the majority of Dutch people find saving and investing themselves difficult and are thus protected from poverty later in life.”
Okay, Dad 😊.
Series: Work & Money
How do you deal with work and money for now and in the future? Do you live from day to day or are you deliberately planning your financial future? And do you arrange ‘in the future’yourself or are you affiliated with a pension fund? In this edition: Jeroen Zuurveld, financial planner and, as of recently, a one-person business.
Jeroen Zuurveld (39)
Profession: financial planner / teacher in higher professional education
Weekly works: 25 to 30 hours per week
Income: “The salary I pay myself from my enterprise is 1500 euro net per month. I earn approximately the same amount teaching. In addition, I receive return on my investments because of value increases and dividends.”
Savings: Together with his wife, a buffer of 20,000 euro. Also an investment portfolio, worth 100,000 euro.
Pension is arranged? Yes
Since when are you acting as a one-person business?
“I started two years ago. It is a huge step, starting your own business, when you have a fulltime job. This happened gradually in my case: after my fulltime job I was working a few days a week in higher professional education, which I am still doing for one or two days per week. I took the leap of faith in the position described above.”
What is it that you do exactly as a financial planner?
“I offer my clients a coaching program in order for them to figure out what’s most important in their lives, what it is that makes them happy. I help them to think freely: when the world is at your feet, what will you do? I then guide them to implement that process step by step and design a financial plan matching their progression. I try to help them put their finances into service of their lives, instead of the other way around.”
And what do you do in higher professional education?
“I teach financial management. This is ideal for me. It fits with the topics I discuss with my clients and vice versa I am able to use my practical knowledge during my teaching sessions.”
Are you satisfied with your income?
“It is more than enough to make ends meet. The amount I earn in excess is added to my investments.”
How do you handle those investments?
“It is my goal to invest 20 percent of my income. I invest in both individual shares and in ETFs. Instead of transferring money to my savings account, I wire it to a broker. I buy pre-selected shares or ETFs through this broker. When your investment horizon is long enough, a return of 8 to 10 percent can be achieved. My entire portfolio is worth approximately 100,000 euro. Investing results in flexibility. I could sell all of my investments today, provided I would like to do so, and the proceeds would be deposited into my account tomorrow.”
Do you want to retire early?
“It is my goal to technically be able to retire in five to ten years. Not that I already want to stop working by then, but it would be great to at least have the possibility to do so. That provides the ultimate freedom. In order to achieve this goal, the return from investments has to be equal to your expenses.”
How much money do you spend on a monthly basis?
“I live together with my wife, who holds a permanent position in the education sector, and our 4-year-old son. As a family we spend approximately 4000 euro per month on mortgage payments, insurances, childcare, subscriptions, the cleaner, groceries and clothing. That is quite an average spending pattern as I notice the same with my clients.”
What are the other things you spend your money on?
“We like to go on holidays. Other than that, I regularly buy sports gear. We live in Zandvoort aan Zee at the coast which is the ideal location for surfing and cycling. And all of those restaurants and bars in the neighborhood are of course also very tempting. We regularly visit a beach bar, provided the country is not in lockdown. Although I do have to say that I sometimes find it rather difficult to spend money now, because I am always aware of the fact that the money will be worth more if I put it aside. I have to keep a proper balance in mind between enjoying it now and accrue enough for the future. The pitfall for many people is that they live too much in the now and forget the consequences for the future. In my case, the opposite applies.”
I would be very satisfied if I am able to keep on doing the things that make me happy
Is there anything else you do in terms of retirement apart from investing?
“Yes. We make sure, for example, that a large part of our mortgage is repaid later on, resulting in lower housing expenses. I also believe that my company will be valuable in the future and that I will be able to sell it. And I have obviously also accrued a part of my pension in paid employment.”
How much would you like to receive per month following your retirement?
“Enough to make ends meet. It is hard to give you an exact amount. Everything you buy now may well be twice as expensive by then. I would be very satisfied if I am able to keep on doing the things that make me happy. I wish the same for everybody. I see plenty of self-employed persons who only have a savings account and don’t accrue anything else. Those savings are idle, no return is made. That is not a problem right now, but how will that look in ten, twenty years? I think many people will be in shock seeing the results. In my opinion, it seems very unpleasant for people to have worked hard their entire lives and then suddenly have to take a retrograde step due to an enormous drop in income.”
Is there still room for improvement in your pension strategy?
“I have mainly made my mistakes in the past. Time is most important in the end, to have the time to build something. When I was a student, I structurally spent more money than I earned, without realizing the impact that would have later on. You first have to repay your debts before you are able to build up any capital. That might actually be one of the reasons I started this kind of work: I have learned from my mistakes and am trying to prevent others from doing the same. I should have started building up some capital way sooner.”
This is what children say about saving, pension and earning money.
This is what children say about saving, pension and earning money They know quite a bit about it. And they also think very carefully about it, the children APG asked about money, saving and retirement for the video Kids & Cash. They are between three and ten years old and they are called Logan, Hidde, Bram, Sophia, Fenna, Jurre, Mila and Naomi. The little ones still have some trouble with the numbers ("I get one hundred euros ten for a job"). But most know exactly how much pocket money they get and how often ("Ten times"!). They know when you retire and why: "If you've worked fifty years and it drives you a little crazy." They know the most important thing in life: "I'd rather have less money than less family." And in the end, they are done with talking about money and saving. "Is money important? 'I do not think so.”
The pension system is undergoing a major overhaul. This means that both employees and pensioners will soon be faced with a lot of questions. That is why pension funds and pension administrators like APG need to adopt a more coaching role. That is what APG CEO Gerard van Olphen said at the Pensioen Pro Annual Conference, a platform for knowledge- sharing in the pension sector.
With the arrival of the new pension system, things are going to change for employees and pensioners. Their pension contributions will still be invested, but the amount of their pension will no longer be fixed because it will fluctuate with both the pension contributions invested and the investment results achieved. And that will also become much clearer: as a member you will soon have your own pension account into which your pension premium will be paid. You will save for yourself, see the fluctuations in your own pension pot and thus become more aware of the risks.
Will I be able to maintain the same lifestyle I have now?
All these changes will undoubtedly raise questions among both employees and pensioners, Van Olphen said: “That’s why companies in the pension sector need to look very closely from the perspective of those members. Much more than they are doing now. They will need to respond to a variety of wishes and questions. For example, people expect us not only to invest their money well, but also to explain and account for it in very understandable language. And people also want to know how much net retirement income they can count on now and in the future.” Not in a complicated way: split into OAP, employer’s pension and their own income from investments, for example, but simply the total. You want to get an idea of whether you can continue to live in the same neighborhood later on, whether you’ll still be able to go on vacation with your family, like you’re doing now. Pension funds should be more aware that it’s all about people’s financial fitness. Whether they will be able to maintain the same lifestyle they have now."
Employees’ and retirees’ right to care
These questions become even more relevant when people are confronted with moments of great joy or great sadness, e.g. moving in together, having children, divorce or the death of a loved one. Van Olphen: “That’s exactly when people are left with many questions, including about the consequences for their pension. Sometimes they can turn to their employer or trade union, but for pension companies such as APG, I believe there is also a clear task. And it’s better if we don’t wait for people to approach us with their questions; rather, we can approach them proactively if something has changed for them that affects their income or pension. Employees and pensioners are entitled to our care.” He feels that although pension funds do not have a duty of care, their members do have a “right to care”.
Better grip on money matters
Pension funds and pension administrators will have their hands full with the transition to the new pension system in the coming years. It is complicated, new regulations have to be put in place, IT systems are being overhauled, and so on. With the possible risk that this leaves too little attention for their members, Van Olphen warned. “I think pension companies like APG should strive to ensure that the new pension will soon be easy for every member to understand. Transparent, and easy to understand. That also means that we need to act more like a coach. There will be a real need for that.” This role of coach in and of itself is not new to APG: one of the pillars of APG’s strategy is to be an “experienced guide” who helps employees and pensioners with their financial future; sometimes directly, sometimes via the pension funds that are clients. Providing them with customized advice on all their financial affairs. An example of this is the APG platform Kandoor (link: www.kandoor.nl), where APG answers more than fifty thousand financial questions a month. Not only about pensions, but also about matters such as rent allowance, severance plans, taxes, OAP, debt assistance, etc.
Still on the right track financially?
Van Olphen emphasizes that the role of coach he is envisioning is different from that of financial advisor: “We already have enough financial institutions that you can turn to for advice and various financial products. We should not aspire to that role. But we can help participants if they are unsure about something, if they want a quick check to see whether something is right or wrong. Whether or not they are still on track financially.” He thinks it’s right that people make high demands on their pension fund: “As a pension sector, we may think that we have the best pension system in the world in the Netherlands, but that’s really not how employees and pensioners see it. They are now being given a new pension system in which they are given more responsibility and run more risk. Not everyone is excited about that. People want to understand what will happen to their pension, they want to feel safe with their fund. It’s up to us to appropriately respond to that with integrity, regarding the new pension contract.”
Former gymnastics coach Epke Zonderland starts national campaign to teach seniors to live with vitality
Age with energy. When it comes to vitality and exercise for seniors, the revolution is starting in the athletic town of Heerenveen. Coaches with experience in top athletic fields are using their knowledge for the start-up organization De Fitte Frisse Fries (The Fit Friesian), whose aim is for seniors to come out of the corona crisis fitter and sharper than they went into it.
Professor of Neuropsychology Erik Scherder was the instigator. And now they are working hard at Sportcentrum Sportstad Heerenveen to actually turn the science into a successful mission, led by a successful Olympic coach. 75-Year-old Tjalling van den Berg is a phenomenon in gymnastics and equestrian sports. In his gymnastics school in Heerenveen, he made Epke Zonderland an Olympic champion and was never involved in any of the recent scandals in this sport.
Tjalling van der Berg is a passionate coach. And a familiar face in Heerenveen, where top athletes always know where to find him for some advice. Whether they are soccer players from SC Heerenveen or top skaters, Tjalling affects them all. With informal training in the gymnastics hall of Olympic allure or a good pep talk. The 75-year-old, who still wears a tracksuit every day, doesn't have an ounce of fat on his muscular body and is living proof of Erik Scherder’s theory that exercise keeps older people vital and sharp. And it has never been more true than now, during these harsh coronation times: exercise is of vital importance. As Erik Scherder says: “When you don't move, your immune system quickly deteriorates. That’s a good reason to cheer this on. Because what we all want now is stronger resistance.”
Retirement is a new start
In recent months, Tjalling van den Berg has gathered some great specialists around him in the field of nutrition, mental training, sleep and exercise. Together they want to make De Fitte Frisse Fries into a national campaign. According to Tjalling van der Berg, retirement is not an end point, but the start of a challenging new life in which vitality should come first. Mental and physical.
“Retired people are often much more concerned with peripheral issues. Theirs brain and bodies are no longer being stimulated. A lot of sitting is the new smoking; nothing happens anymore. Socially they just talk about the old days and hardly bother to pick up contacts again. As soon as work falls away and older people have to think of something for themselves, they stop being creative. Self-management hardly fits in with our society anymore.”
Professor Scherder's studies proved that a lifetime of movement stimulates the brain. That means walking, moving, making music, just being creative, picking up a study and staying among young people.
Armed with their knowledge from top sports, Tjalling van der Berg and his people now work with older people. "I really see that as a mission. In the past I got to work with top athletes like Epke and now I try to get hundreds of older people in top shape, physically and mentally, every year. We teach them to set goals again, to get energy. Sometimes it's about very simple things. For example, taking the stairs instead of the elevator. Or calling a friend every day or going for a walk with them. We've put a lot of energy into that. It's a way in which we can give them energy so that they can take another step forward. There is nothing worse than an aimless person."
What can a retired Dutch person who wants to keep up their vitality learn from top athletes like Epke Zonderland or Sven Kramer?
“Particularly things on the mental level. Discipline. Focusing. Force yourself to take 5000 steps on your pedometer or bike every day for four to six weeks. If you keep that up, without a personal coach to direct you, that top athletic discipline is a great way to get your life back into a good rhythm.”
Sven and Epke are very good at setting goals. “I want to live healthy”' or “I want to become an Olympic champion”. Both top athletic goals. Learning to deal with setbacks and difficult moments is also part of this. You always come out stronger”.
Where do things sometimes go wrong for older people?
“They often have no clear purpose in life after retirement. They think their life is coming to an end and they sit still. That's unfortunate. Someone recently spoke these beautiful words: 'In Africa, gray signifies wisdom, but here we say: if you're gray, take a trip.' As if that makes us happy. We have too much propaganda for the 'Swiss life feeling' for our retirees, when what we really need is active elders. They can still be very valuable. They show how you can be healthy as you age, they can give advice on how to deal with setbacks, how to become disciplined. They are great role models. But here, older people are looked at with something akin to pity when they do anything. We really must stop that.”
You must always get the most out of every single day
How hard are you still working at age 75?
“I’m busy with these kinds of things pretty much on a daily basis. I purposely choose things that give energy. That makes it easier for me to say ‘Yes, I can help you’, to a particular project or a person.”
You’re a coach 365 days a year. Your entire life. I think that, even when you get older, you should work on your physical, mental and social health. Don’t waste another day; that’s a mortal sin.”
And so, it’s not about just thinking about taking a trip through Europe in the RV?
“No, absolutely not. It’s so strange that people look forward to a weekend or a vacation and in between there is nothing. It’s like they can only stick it out all year because of a vacation. As I’ve said before: whoever invented the words vacation and work should be fired immediately. If you see your work as a hobby, you have a completely different approach. Then it’s not an obligation but a challenge. For older people, the transition is often where things go wrong. They look forward to retiring, then they may still do something for two or three months and then they seem to start isolating themselves. They shut down, literally and figuratively, mentally, physically and socially. What a shame. Plus, people who think positively on average live seven years longer than a negative thinker. Happiness is a great mindset for people to live longer.”
Has corona changed the perspective on aging with vitality?
“Yes, I think so. Corona has magnified everything. That’s what I like about it. Everyone sees corona as a problem; I see it as an opportunity. Corona is shining a light on the fact that we are naturally lazy people and that movement is our salvation. We have received a huge blow on all fronts. The healthy older person is now also magnified. They have to save themselves, take action. Escape from that little room, get back among the people and keep moving. I think that the corona crisis ultimately provides the insight that vital living has been underestimated here for years. That may even have caused more corona misery for a number of people.
So, we get to work with sleep coaches, nutrition coaches, exercise coaches and relaxation coaches. Together we look at this challenge: what can we do to get people who are not fit to start moving on all fronts? This not only means that I teach them to walk, but also that other coaches will join in: ‘What about your sleep, how do you deal with stress, what do you eat, how do you relax? Do you have a clear goal in your life? What are you good at?’ Together we form a platform to make all kinds of target groups aware that exercise is the medicine for a healthy future.”
The Fitte Frisse Fries movement seizes COVID19 to get stronger. Their goal is to make Friesland the healthiest province in the Netherlands. Lifestyle determines about 90 percent of your life expectation. That is why coaches work with setting goals, movement, being together, relaxing, food and sleep.
'Nature is completely confused!' Years ago, Van Kooten and De Bie, a Dutch comedy duo, were concerned about the timing of nature. Blooming carnations on the beach in December - things like that. Even now, people are amazed at seasons that are out of phase. It's the middle of winter in the economy: entire sectors are frozen. At the same time, the wonderful spring feeling of growth and prosperity has prevailed on the stock markets for some time now. Now, who's mad?
There are several explanations for the gap between the stock market and the economy. First of all, most of the economy is unlisted. We will not see the inactive hospitality and events industry and Dutch Railways, which runs at half speed, at the trade fair. Many companies that benefit from corona, including technology companies, often do have a listing, also in the Netherlands.
In addition, investors are not so concerned with the now. That doesn't sound very mindful, but the expected cash flows in the future do determine the value of a company. In financial markets, it is therefore mainly about tomorrow and the day after tomorrow. And sooner or later, the coronavirus will have been subdued, or at least its ability to cause serious economic damage. And if we return to old trends, wouldn't it also include comparable stock prices?
Still, that's not the end of it - apart from the fact that after corona, there will be winners and losers. The broad MSCI World index is up 10% since January. Based on IMF figures, we estimate that economic activity in the next ten years will be 3.5% lower than expected. Because profits are a residual item, they are more volatile than the economy itself. On that basis, profits would turn out 6 to 11% lower. This macroeconomic estimate is in line with adjustments in the consensus among stock analysts who monitor companies. But one way or the other, it remains a contrast to the rising prices.
The fact that more is paid for less profit has everything to do with the low interest rate. Profit in the (distant) future is therefore worth more. In addition, investors are demanding less high-risk premiums, aided by the strong government interventions that are keeping a financial crisis at bay for the time being.
As such, the high stock valuations are logical.
I don't know whether that is completely reassuring. Profits can be disappointing if deferred bankruptcies still get through. Without wanting to come across as an extremely fearful person - another character of Van Kooten and De Bie - positive economic news can also hit the market. An overly vigorous economic recovery, while justifying earnings expectations, could also herald the end of the corona support and push up interest rates. Who knows, maybe next year, we might be surprised about the markets doing so badly, while the economy is performing at its peak. Nature…
Charles Kalshoven is a senior strategist at APG
Rowan Siskens about agile living and the boomerang retirement
Work till you’re 67 and then enjoy your retirement. Or could it be different? A search for Plan P: innovative ideas and alternative scenarios for organizing your life, work and retirement. Rethinking for and by young and old.
Rowan Siskens: “After every three to five years of working, take a few months of unpaid leave.”
Retirement at age 27
Rowan Siskens had only been working for his first employer for two years when, during his evaluation meeting, he said he wanted to take a leave of absence without pay. His managers were surprised, but also positive. Six months later he had a retirement party where everyone dressed up as an old geezer or crone, and then he had five months off. Siskens (27 at the time) went surfing in Bali, traveled around Mexico with his girlfriend and wrote a book: Agile leven. In that book he explained the philosophy behind his lifestyle: after every three to five years of working, take a few months of unpaid leave. Siskens feels that the term sabbatical doesn’t quite cut it; he prefers to call it interim or recurring retirement. A kind of boomerang retirement, instead of a long rest period at the end of our career.
Short-cycle learning, working and resting
In his book, Siskens – IT worker by trade – draws a parallel with agile working: splitting projects up into “sprints” with interim goals. After every sprint, you look at what could use improvement and adapt your working method if need be. This way you are more agile and you can respond to change more easily. Life is really just such a project, Siskens says. That project is still being managed in the old-fashioned linear way: first you learn for 20 years, then you work for 40 years and then, if you’re lucky, you get 20 years of retirement. Education, CAOs and pension systems follow a fixed pattern where we go through three phases of life successively and crossovers are difficult or impossible. “It has just developed this way, even though we actually could organize our lives in a much smarter and more agile way,” Siskens argues: with short-cycle sprints of working for a few years, alternated with a period of rest, reflection and possibly further education to shift the direction of your career. Sounds sensible, but how would we do this and who would pay for it?
Why retire in the interim?
Before his first job, Siskens took a world trip. He didn’t want to wait to experience that ultimate sense of freedom again until he was 67. “Because I might not even make it. I had examples in my immediate vicinity of people that died shortly after they retired.” In addition, we are running into retirement stalemate in terms of time, resources and energy, especially now that life expectancy is increasing and the age of retirement has been pushed back. Young people have time and energy to do fun things, but they don’t have the money. Working adults have money, but no time and their energy is spent on their job and a young family. Older people have time and money, but often no energy left for climbing Mount Everest or chasing some other dream. According to Siskens, interim retirement can break through that stalemate. It makes dreams come true, creates happiness at work, and could allow people to keep working longer. “If you’re happy with what you’re doing, the age of retirement becomes just a number and completely irrelevant.” Recurring retirement also fits in well with trends like working with more flexibility, digitalization and life-long learning.
Who’s going to pay for that?
Siskens had saved up 5,000 Euros for his first retirement period. That was not really enough, but he managed to get by with it, because he was able to stay with friends and relatives during his travels. His girlfriend payed for the fixed expenses. He is currently saving up for his next retirement. If you want to live an agile life, you will have to make some sacrifices: don’t drive a big car or don’t drive a car at all, and don’t buy crap you don’t need just because it’s on sale. Then, you invest those savings, for example through (index) investments. “It’s easier to save 10% than to you tell your boss you want to earn an extra 10%,” Siskens believes. The boss can contribute in a different way. For example, he could give you the option to save part of your salary and buy days with that. Or by continuing to pay your pension premium during your unpaid leave to prevent a pension gap later.
Will there be anything left for the future?
Don’t serial retirements use up everything, so that there won’t be much left for when you permanently retire? No, on the contrary, Siskens argues. “For many millennials, retirement is nowhere on their radar. By taking a retirement period once in a while now, you bring the concept closer to home. You become more conscious of the importance of good financial planning so that you will be able to do things you enjoy in the future. An advance from the pension pot to finance the interim retirement doesn’t sound like a good idea to me, for example. Then you won’t have enough later.” Siskens is also the co-host of the “pension season” of the Spaarpodcast (Saving podcast).
“We explain the pension system in an accessible way and we try to make young people pension-wise. Maybe APG could also work on more pension consciousness among young people in an innovative way. Right now, emails and letters about pension and retirement usually go straight into the recycle bin, I’ve noticed.” Meanwhile, Siskens is working again, as an Application Engineer at the software company Mendix in Rotterdam. He wants to get promoted, but he also wants another time-out in about four years, although it is his girlfriend’s turn first. His goal for his second pension: a pop-up restaurant on the water, or building a houseboat. “Those are both on my Dream list and I also have many other plans.”
What do employers think of it?
Siskens also sees benefits of agile living for employers: the work of the interim retiree can be done by coworkers temporarily. This will create job shifts and role rotation, people’s employability will become broader and understanding for each other’s work will increase. What does Sisken’s own boss think of his intention to retire again in a few years? We asked Radjesh Ramautar, Siskens’ immediate supervisor at Mendix, a fast-growing Dutch company with global ambitions, which was taken over by Siemens in 2018. “We have to compete with billion-dollar companies over scarce talent,” Ramautar tells us.
“To be of interest to the best people and get them committed, it is important for them to get the opportunity to grow, both in their work and outside of it. As a company you need to keep investing in that, but it also benefits us. During their leave, people can travel, get to know other cultures, experience new things and broaden their horizon. That will give them energy, a sense of perspective and new insights. They always come back richer than they were before and that is good for the company too.”
But can you still get promoted if you often take a leave of absence?
Ramautar: ‘Rowan is talented, driven and social; he has it in him to become a good manager. He would be able to take that next step sooner if he waited five to seven years to take his temporary retirement. But that is some ways in the future. Our company has a start-up mentality and is growing enormously. Even planning a few months in advance is difficult sometimes, never mind a few years.” Siskens’s pop-up restaurant may have to wait a bit longer; time for a sprint first.
Column by Nick van de Sande - Korpershoek
The parliamentary elections will be held in March 2021. For those active on or around the political square kilometer in The Hague, the election fever has been rising for months. But a fiery election debate about retirement on a talk show sometime in the next few months on prime time is unlikely to happen. Considering the importance of expeditious implementation of the pension agreement based on solid legislation, that is a good thing.
After a decade of consultations and negotiations, the cabinet and social partners managed to reach consensus last summer on the details of the pension agreement. Most political parties in the middle have now embraced the pension agreement to a greater or lesser extent in their draft election programs. Even 50PLUS seems to have given up its opposition to the accord and would like to be involved again in the transition to the new pension system. In this context you can once again distinguish yourself as a pension spokesperson in the House of Representatives.
So what do you do then? As a standing committee for Social Affairs and Employment, you organize round table discussions about the pension agreement that last one and a half days. For which MPs can invite experts as they see fit. So that there is something for everyone and as a politician you can still put yourself in the spotlight. And so it happened on November 4 and 24.
As many as 21 representatives of the national pension society gave an appearance in the House of Representatives spread over two days in eleven short successive blocks. Among them, various people directly involved in the pension agreement. But also people who have been more on the sidelines to date, and who therefore passionately seized the opportunity to storm the national political stage to put forward their own (sometimes controversial) thoughts.
What was special about this was that key players in the realization of the pension agreement such as FNV and VNO-NCW were not even invited at first. Gijs van Dijk (PvdA) took care of this at the last minute - rightly so.
During the round table discussions, every Member of Parliament was able to collect his or her right from someone on some pension aspect. In order to especially appeal to their own supporters. Often they resorted to well-known hobbyhorses to show whether or not this or that person had brought in something for his supporters, or whether someone's expertise would not give cause to do things completely differently.
Is what is in the pension agreement feasible and enforceable? Legitimate questions that testify to the chamber's progressive insight
The "result": a self-sustaining 660-minute surrogate political retirement talk show. The neutral viewer - not helped by the much used pension jargon - was mainly confused and exhausted. Given the cacophony shown, you would almost doubt whether a historic pension agreement has been concluded at all.
On the other hand, the MPs cannot be blamed for wanting their own "election show". After all, for years they have been forced to observe the slow progress of the polder towards the agreement, mainly from the wings.
In addition, it is - of course - important for the House of Representatives to study the new pension system. During the round table discussions, for example, explicit attention was paid to implementation aspects. In other words, is what is in the pension agreement feasible and practicable? Legitimate questions that testify to the House's progressive insight. In the past, implementation aspects have remained (heavily) underexposed in other legislative processes. With dire consequences for large groups of individuals, as we have seen especially in the childcare allowance affair.
It is to be hoped that the further elaboration of the pension agreement and its transposition into legislation and regulations will proceed smoothly - despite a possibly lengthy formation period towards the next cabinet. In which the House of Representatives no longer searches with a political magnifying glass for so-called mutually dividing differences of opinion. However, based on diligent analyzes and legislative work in the spirit of the pension agreement, the House contributes to sound and enforceable pension legislation.
Because timely attention to legislative quality and implementation aspects is crucial for the creation of a pension system that can gain the trust of pension participants. For them, the millions of participants, most of whom have no idea what the new system means for them, the round table discussions shown in recent weeks were unfortunately of little (show) value.
1 See also the position paper by Pieter Omtzigt (CDA), published on 7 November this year, "The House of Representatives and the Implementation, a difficult combination", written to the parliamentary committee of inquiry for implementation services. (link)
Pension system reform requires drastic ICT operation
The Netherlands is on the eve of the largest-ever pension system reform in the world. That transition is causing quite a few headaches in the sector. One of the challenges is whether pension administrators’ existing ICT systems are suitable for this major change to the system. And if that is not the case, is there still enough time to set up a completely new ICT architecture?
To start with the pressing question: can the current systems be adapted to accommodate the new contract? According to Wim Henk Steenpoorte, who is responsible for the transition to the new system at APG, the two systems that APG is currently using are "very good systems in and of themselves, which are currently working just fine. Of course, you can see if you can modify existing systems, which is why we are now doing research into this. But because the character of the system is changing so fundamentally, I’m not ready to make any big claims that that route is the most sensible. That is why we are consciously looking broadly at different options: build it ourselves or buy or create it through an alliance.”
The fundamental change Steenpoorte is referring to concerns the transition within the Dutch pension system from defined benefit (DB) to defined contribution (DC). With a DB contract, the fund makes a promise about the amount of future pension benefits; in the case of a DC system, the participant knows what he or she is investing, but has less certainty about the amount of the pension payments.
According to Steenpoorte, what makes this ICT issue so difficult is that the administration of a pension contract becomes increasingly complicated over time. "They are contracts that store an enormous history. Changes are made every year. People get married or divorced, for example, and all those lifetime events have a major impact on the administration of their pension. This accumulation of changes makes administration intrinsically more and more complicated.”
A lot of pressure
In addition, apart from the two variants of the new pension contract, a number of other legislative changes already need to be implemented in the ICT systems. "I wish all we had to process was the new pension contract in whichever variant a fund chooses. But there is already a lot of pressure due to the bill on pension equalization, regarding divorce, lump-sum payment, standardization of survivor's pension, standardization of the partner concept, experimenting with legislation on pensions for the self-employed and evaluating communications regarding pensions. What we really want to avoid is having to make all these changes twice; once in the current system and once in the new system," says Steenpoorte. In any case, it going to be a very busy time for the people working on our current systems.
He doesn't have to think long about what the ideal circumstances would be to make the transition go smoothly. "To begin with, speed up the process of arriving at new legislation. It has now been promised that this will be completed in December 2021, and in order to achieve this there cannot be any obstacles. But it is imperative for the decision-making process at the level of social partners and pension funds. Secondly, everyone would benefit from clarity regarding the process in which funds choose their options – with respect to the form of the contract, but also, for example, about the design of the solidarity reserve. The third requirement for a workable transition, is the conditions that are imposed on the integration (transferring participants’ pension entitlements from the old system to the new system, ed.).
That integration is going to be a complex job to begin with, but if there is also going to be an option to make individual objections, that is going to really complicate things. That also applies to retroactive changes. For a DC contract, that is almost impossible to do. Suppose, for example, a year’s worth of pension premium is invested retroactively. That premium can then no longer be invested in the financial markets of a year ago, but the participant is entitled to any returns achieved during that year. How are you going to solve that? Because we can only process changes on the day they are reported to the fund and the administrator; the so-called timeliness principle.”
There is also a possible scenario in which there is no integration. "All participants would then receive two pension contracts, one for the old system and one for the new one. Changes would then have to be processed in both the old and the new system. When there are questions from participants, the two systems would both have to be examined to find an answer,” Steenpoorte says.
Will APG be able to deal with this? Steenpoorte: "We are imagining every scenario, and ultimately, there is a solution for everything. But this would really be a nightmare - for funds and their participants, and for APG.”
It is the emerging generation in the labor market. The managers of tomorrow. The thirties. How do they deal with work and money for now and later?
Today: online marketer Santousha Kalk.
Santousha Kalk (33)
Profession: online marketer
Weekly working hours: 20 to 30 hours
Income: EUR 7,000 to 7,500 gross per month
Savings: EUR 75,000
Pension arranged? No
What do you do as an online marketer?
"Lately, I've focused largely on online advertising, via social media and Google. My clients are mainly SMEs, like dental practices, firms of civil-law notaries, but also coaches, trainers and webshops."
How long have you been doing this job?
"I started online marketing in 2006, as an employee at the time. I've always done something different; at first, I was mainly involved with SEO, then with Google Ads and advertising on social media."
Since when have you been self-employed?
"Since I've been living in the Netherlands. Until a year ago, I lived in Suriname, where I was permanently employed."
Have you consciously opted for entrepreneurship?
"Yes. I wanted to have freedom of location, and as a self-employed person, you also earn better. I've now also consciously chosen not to work full-time anymore, so that I can organize my own time. If I feel like starting later, I will, and if I need an afternoon nap too."
What do you like about the job?
"I've always been a nerd. As a child, I built my own websites, which I then tried to generate traffic for. Growth is very measurable online, you immediately receive data you can use. It gives me a good feeling to be doing that. The industry is also constantly changing, it's never boring."
Does it earn you enough?
"Absolutely. What I earn is more than enough for me. I'm happy with it and quite proud of it."
What are your fixed charges?
"Every month, I pay about 900 Euros into the joint account and I don't spend much more than that. I work from home and therefore have no costs for renting an office. I hardly spend anything on clothes, I'm at home anyway. My main monthly expense is the rent, together with my partner, it's 1,050 Euros. We live in a rented house in The Hague. We're looking for a house to buy, but it's not easy in the current market. It's difficult to get a fully-fledged mortgage, especially as a self-employed person, also because I can only submit accounts for one year."
Do you pay close attention to what you spend?
"Yes, because I want to build up a certain buffer. Not that I have a target amount to save, I just put aside as much as possible. I earn well now, but I don't want to live that way. I don't know what the future holds, so it would be unwise to spend everything I earn right away."
Do you think about your pension?
"Not really. I'm still researching what's the best option for me. I have quite a bit of savings, but I haven't reserved a certain part of it for my pension. I want to have the freedom to stop working earlier. I still have to find out how."
Did you accrue pension when you were still employed?
"Yes, for about twelve years when I still lived in Suriname. But that's a country in crisis, I doubt whether the money I accrued will be worth anything in the future. In any case, the amounts there are low; I always compare it to pocket money for a child."
How much would you like to receive each month when you retire?
"I have no idea what I would need. I assume that my fixed charges will be much lower by then, but I'm not sure. And turning 100 or 75, that also makes quite a difference. Who can predict how long you'll live?"
What could improve on with regard to your pension?
"Everything! I haven't done anything yet. It feels so overwhelming, I've found myself putting it off. That's not good, because it's quite drastic. The choice I make now will really affect what my future will look like. I want to make the right choice and take the time to make a good decision. I'm thinking of hiring a consultant to explain it all to me."
Why so many soccer pros go broke at the end of their career
Top soccer players earn millions, but the money often drains out in no time. They live in a make-believe world with private jets, designer clothes and extravagant indulgences. When their career is over, more than 60 percent of the European soccer players go bankrupt.
Soufyan Daafi created the company Sport Legacy and Kenneth Vermeer became their ambassador. Their goal: to create awareness. “They think about their financial future much too late.”
Luxury vacations on tropical beaches. The most expensive cars. VIP tickets to the most eccentric parties. Extravagant watches and a harem of “gold diggers”. If you follow the top soccer players on Instagram you will see a world of unlimited extravagant indulgences. A world where money is spent by the ton. But the reality behind it is really tough. The road from millionaire status to bankruptcy is shorter than the fans realize.
Help where possible
Former international player Kenneth Vermeer, also former goalie of Ajax and Feyenoord, plays in sunny California these days, for Los Angeles FC. He is concerned about former soccer stars who fall into a miles-deep, black hole at the end of their careers. His former teammate and friend from his younger days at Ajax, Soufyan Daafi, started the company Sport Legacy and Kenneth Vermeer joined him as an ambassador for the company. Sport Legacy’s vision is to help where possible in a bizarre soccer world where nothing is what it seems.
Soufyan Daafi: “Not everyone gets to have a career with an income of millions. I saw it all around me. One of my best friends, Kenneth Vermeer, was a champion with Ajax for three years. At one point he was benched, and it was not certain if his contract would be renewed. There was no interest from foreign clubs. That was when I realized how big the risks are when that soccer income disappears. Kenneth was fortunate and got signed on with Feyenoord.”
In a world where a 17-year old youth can become a millionaire in one day, you might wonder what big clubs like Ajax and PSV are doing to keep their talents on tracks
“The club always recommends for everyone to speak to a financial advisor. Sportdesk ABN Amro, for example is active with Ajax. For AZ it is the Rabobank. But that help only goes so far. When serious financial problems occur, all the parties end up point the finger at each other. The club will say: ‘That’s what the agents are for.’ The agent will say: ‘We assist the player, but he is responsible for himself.’ And the player looks at both parties: ‘I need your support.’ And that is what we want to do now, with Sport Legacy. Making players aware that they should not fall into all kinds of financial traps but should ask for help before any of that happens.”
Most soccer players have a spending patterns of between 5000 to 30,000 Euros a month
“We keep in touch with agents, the clubs and the players to prevent problems. 62 Percent of the players go bankrupt when their career is over. We want to drastically decrease that number. In America, those percentages are even higher; in the NFL, it is as high as 80 percent. It’s easy to explain. When you’re making millions, it feels like it will continue forever. Most soccer players have a spending pattern of between 5000 to 30,000 Euros a month, or more. When you’re used to a certain amount coming in every month and then it suddenly stops and you only have a million or two in your bank account, you’ll be bankrupt in as little as five years.”
Especially in videos and photos on Instagram, soccer stars are increasingly exposing their sometimes exotic lives. A weekend on Ibiza with the private jet, a road trip with the latest Bentley. And in between, going to the most exclusive parties, dressed in expensive designer clothes and dripping with jewelry, where the jetsetters are served the most expensive champagne.
Soufyan Daafi: “Players think it’s the norm, but it is a make-believe world. I’m currently having conversations with guys that have nearly a million followers on Instagram but are in big trouble financially or feeling depressed. I’m not saying don’t use Instagram, but what do you use it for? As a platform for your own branding, which is fine, or to show off your life of luxury to the world?”
Do players around age thirty think about their financial future?
Soufyan Daafi: “Yes, they do, but often much too late, unfortunately. They accrue a CFK pension fund. The purpose of this is to offer a player/runner a financial base after his professional sports career, so that he can focus (better) on his new career. We are also talking to those players. The CFK sees soccer players as a nice asset, but also a liability, because they can’t touch their money. I talk to soccer players whose careers are already over and have made arrangements with the CFK to get paid in the coming twenty or thirty years, but they’re thinking, ‘I need it now’. For example, to develop a real estate portfolio. The CFK program doesn’t allow for that.”
But there are positive examples too. For instance, international player Ryan Babel. The former Ajax player decided to delve into money matters and he ended up becoming a real estate entrepreneur. He has been thinking about his soccer retirement for years. “I want to at least maintain my current lifestyle. I don’t want that to decline,” Babel says. He is buying houses and apartments all over the world. At the recommendation of his agent, he purchased a new apartment every quarter. Babel is now working closely with Sport Legacy.
Soufyan Daafi: “Wat Ryan is doing right is that he realized early on: ‘I want to keep my current lifestyle. I want my kids to keep going to private schools, I want to have nice vacations, I want to be able to keep visiting those beautiful places I go to now.’ He realized he would need a big income for that. And that in the Netherlands there is virtually no job that will pay as much as his soccer salary. So, he figured out what his options were. He went into real estate with this goal: After my soccer career is over, I still want exactly the same monthly income I have now. I admire Ryan, because he also wants to share what he has been learning with the younger players. He tells them: ’When you get your first contract, don’t buy a Bentley; do something useful with the money.’ I’m learning a lot from him.”
Kenneth Vermeer and Soufyan Daafi
Are these problems common in the Netherlands?
“It’s not substantiated with numbers, but I have a sense that it is. When you look at how many talents there are in the Netherlands. Even just looking at the Dutch team, all those debutants. I know players who played for top clubs in the Netherlands, Spain, England and Italy, and they are currently facing serious financial challenges.”
What exactly can you do for these players?
“As Sport Legacy, we approach players with simple presentations. At the kindergarten level. ‘Peter, you’re signing your first contract. What kind of car do you want to drive?’ They often pick a car that’s worth a ton (100,000). Then we ask: ‘Are you going to pay for that car out of your signing fee, with your savings or with your salary?’ And then we want them to see that if they bought an apartment for two tons and rented it out, that renter will be paying for their car. The difference is that the ton spent on that apartment will be appreciating in value, whereas the ton spent on the car is always depreciating. That is the kind of awareness we want to create. And as soon as we do, the player realizes: that is true; it can be done differently. I can get that luxury item without spending my own money.
We are also quite confrontational. ‘If your salary were to stop today, what are your expenses? How much income do you generate right now, besides your career?’ And then we calculate how long it would take for that player to be bankrupt. I know a player in Feyenoord who doesn’t have to worry. If his salary stopped today, he’d be doing fine, financially, for another 86 years. But I also have players that are finished after three years and then we look at: ‘What other passion do you have besides soccer?’ Then you get to hear all kinds of interesting ideas. Opening a ski school or a personal gym. Together with those players we then look at how we can get that set up.”
What are you most proud of so far?
“That we have been able to get the attention of the soccer world in a relatively short time. I can’t say our name is fully established yet, but our presence is increasingly being embraced.”
Many of the self-employed are hardly accruing any pension. Of the 1.5 million self-employed persons in our country, 40 percent saves (way) too little to enjoy a comfortable retirement in the future. And that’s worrying, according to legal expert Mark Boumans, who recently graduated on this topic at the VU University of Amsterdam. “Pension funds have an obligation in this respect, by creating custom products for the self-employed.”
Our pension system may be known for the best in the world, this is of little interest to the self-employed. They largely fall outside the scope of the pension system, is the conclusion of Mark Boumans in his thesis on pension for the self-employed. Boumans is working at pension consultant Montae & Partners and connected as a legal expert to the Center of Expertise Pension Law of the faculty of law of the VU. He conducted a seven years’ investigation on the pension situation of self-employed people in the Netherlands and discovered that it doesn’t look good.
Whereas employees usually accrue (mandatory) pension through their employer, the self-employed are responsible for their own pension accrual. In practice, however, it has become clear that not all self-employed persons take that responsibility. And that could result in a major problem, says Boumans. “If you don’t save money for your pension yourself, you will only be entitled to the state’s pension (AOW) later on. That’s not a bad thing if your income has always been at the level of minimum wage. But a large group of workers who are used to a higher level of income, will not be able to make ends meet.” And if it turns out later on that a large group of people has not saved enough pension, it is very likely that society has to pay the bill.
Reason enough to do something about it now. But as the self-employed continue to postpone their pension accrual, the politics is doing the same with the self-employed issue. The problem already started, according to Boumans, with the establishment of our social provisions. “Even back then, there were discussions about the ‘self-employed workers without employees’ and what we were supposed to do with them.”
The group of self-employed has grown substantially, in particular during the last two decades. The Netherlands even is the European frontrunner in this respect, according to Boumans, and he expects for this increase to grow even more due to Corona.
You would think that the pension agreement has surely taken this into account. But that’s not the case, according to Boumans. “A new system is announced but what is actually coming, is a different design of the supplementary pension, as arranged for employees. That is what it’s about. When you look at all Parliamentary Papers over the past ten years, it almost always involves employees. It’s not until the last page that you will see a small section on the self-employed.”
The things that go wrong
This is where it goes wrong in the current system: everyone in the Netherlands, including the self-employed person, is entitled to a state’s pension (AOW), the first pillar of the pension system. But they have little access to the second pillar, the collective and supplementary pension of, for example, the sectoral pension funds. There are only two sectoral pension funds to which a compulsory participation applies, one in the construction industry and one for painters. That involves, according to Boumans, 2 to 4 percent of the self-employed. The remainder of the self-employed persons is dependent on the third pillar: ensuring supplementary pension in private by saving money through the bank or by taking out an annuity insurance. But only 11 percent actually does that.
The vast majority of the self-employed saves for his/her pension outside the pension system, by saving and investing money, Boumans concludes. That is to say, if they save money at all. That’s a bit strange in his opinion. “We have the best system in the world, yet 15 percent of the working population in our country is not participating. That is quite extraordinary to me.”
Making it mandatory
“A good step forward would be to allow the self-employed access to the second pillar.” But as long as that is voluntary, Boumans doesn’t expect the self-employed to wait in line to join. “In the past few years, several custom products have been designed in the third pillar for the self-employed, such as the pension for the self-employed without employees. That didn’t fly: the self-employed are not coming.”
That brings us to what Boumans calls the ‘taboo subject’: obligation. The word obligation is like a red rag to a bull for the self-employed. Still, he is a supporter. “If you give employees the choice in whether or not to accrue pension, it wouldn’t surprise me if many of them would respond: just forget about it. And that’s exactly the way the self-employed feel about the topic. We have a variety of voluntary possibilities to accrue pension in the third pillar and beyond, but a large group is not utilizing those possibilities.”
Procrastination is one of the reasons, Boumans thinks. “Pension is complicated and no fun to think about. People often really start thinking about it once they reach their fifties. But if you still have to save your pension capital by then, you may well be too late.”
We have the best system in the world, but 15 percent of the working population in our country is not participating
There’s also something called an interim solution, which is very attractive to Boumans. Either an opting-in variant, giving you the choice to join, or an opting-out variant, where you save pension automatically, unless you object. “Behavioral economics shows that people are usually choosing the standard option. The same behavior can be seen when it comes to the Donor Law. If you would like a much larger group of self-employed to start saving for pension, without making it mandatory, this is the best way to do it in my opinion. You could create a generic nationwide pension scheme for the self-employed, executed by a pension provider. The problem is that this variant does not yet exist in the Dutch system.”
Boumans also investigated how this has been arranged in other countries. The problem appeared to exist to a much lesser extent or not at all in Belgium and Denmark, but the self-employed issue is considered a ticking timebomb in the UK, he says. “The growth over there is also booming and similar issues occur. What is interesting though: a system of opting-out is in place for employees and the employer has to offer a pension which the employee is then able to refuse. You participate, unless... The discussion is now ongoing in the UK whether they should introduce that same arrangement for the self-employed. If that happens, it is very interesting for the Netherlands to see how that works out.”
It is about time for the politics to seriously start making an effort when it comes to pension for the self-employed, Boumans says. And also pension funds should feel an obligation in this respect, by creating custom products for the self-employed. “Because the pension funds are almost exclusively active for employees at the moment.”
If you live or work in a city, you have a greater chance of being exposed to them. It could happen at the office coffee machine, or at Starbucks, or while waiting at the bus stop. They can be transferred from one person to another whenever there is contact between people. And not only that, but they tend to mutate at lightning speed. Once they are rampant, there’s no way to contain them. Face masks don’t help. Vaccination is futile. But fortunately, none of this necessary. I’m not speaking about virus particles. No, I’m referring to something else, with an equally viral impact: ideas.
We owe our wealth – for a significant part – to the “contagiousness” of good ideas and their tendency to “mutate”: to merge with other good ideas. There was no need for Elon Musk to invent the wheel, and Steve Jobs didn’t have to go through the bother of developing the internet before he launched the iPhone.
Still, every new idea needs a springboard in order to evolve and be disseminated. And what better place for this than a city? The presence of universities, cultural institutes and venues, as well as restaurants and cafés where people can meet – whether by chance or not – plays an important part in this. Like they say in Silicon Valley: “Knowledge travels at the speed of coffee. Cities are a determining factor in economic growth: the bigger the city, the higher the productivity.”
The circumstances that facilitate the exchange of ideas are, unfortunately, also those in which the novel coronavirus easily spreads. Cafés, bars, and restaurants have once again closed their doors because of the virus, and many people are working from home.
Will cities still serve as an engine of economic growth in the post-COVID era? The virus has caused us to break quite a few ingrained behavioral habits. The thirty-day period apparently needed for habits to be broken is easily reached by most people who work from home. Once the big teleworking experiment is over, not everyone will want to return to the regimen of five days at the office. You may have missed your co-workers, but seeing them only a few days a week is probably more than enough.
Will cities still serve as an engine of economic growth in the post-COVID era?
Teleworking can structurally decrease the demand for office space, as well as the demand for housing in cities. Commuting becomes less important while space becomes more important. An exodus from the city can only reinforce this trend. Coffee corners and bars were already having a difficult time due to the debts they incurred during the lockdowns. A decrease in spending by residents and commuters doesn’t make it any easier. If the range of facilities diminishes in terms of diversity, this will also impact the attractiveness of a city.
Whether this is an ongoing trend still remains to be seen. The fact that there are television shows these days about how much you will benefit in terms of space and housing when you leave the city is illustrative of this. Architect Rem Koolhaas – creator of numerous urban landmarks – made the following remark on the Dutch TV show Buitenhof: “If you live in the city, you’re a loser.”
How does this affect the investment portfolios of pension funds? First of all, the relative attractiveness of different types of real estate can change within a real estate portfolio – examples include distribution centers in favor of offices. At the same time, this is a trend we’d been anticipating, and which is only accelerating due to COVID.
If cities become a less prominent platform for the exchange of ideas, an important growth engine will disappear. This ultimately translates into lower returns, or a more expensive pension.
But the question remains, of course, whether or not this will be replaced by something else. Perhaps we’ll find new ways of cross-fertilization while spending part of our time working from home – possibly with the aid of new technology. Ideas about this are more than welcome now. So, if you have a good idea (preferably a bit contagious and sensitive to mutations): please share it!
Charles Kalshoven is a senior strategist at APG
The Dutch pension system is again rated the best this year in the Mercer Index. Why is that and how is pension arranged in other countries? We asked two experts.
We like to complain about it, but with relatively little reason: the Dutch pension system is the best in the world. In the Mercer Global Pension Index, that compares all pension systems in the world on several crucial points, ‘we’ are rated at the top position, just like last year. “No other country scores this good on all of those points as we do”, says Rob Bauer, professor Institutional Investors at the University of Maastricht. The index assesses the adequacy, durability and integrity of a pension scheme. Are the payouts sufficient for the participants? Is it affordable in the long term? And how honest and transparent is the system?
The Netherlands scores quite alright on all of these three points, also says Onno Steenbeek who is responsible for strategic portfolio advice at APG and works as a professor in risk management of pension funds at the Erasmus University. “The entire world is jealous of the Netherlands”, he says. “What makes us unique within Europe is the fact that we have saved a lot of money labelled pension.”
That’s something the people in a country such as the United States can only dream about. With a ranking at the 16th position on the international list, the US is not scoring very well. The paternalistic model of the Netherlands, in which it is mandatory for us all to save for our pension once we are employed somewhere, is just unthinkable in the US, says Bauer. Annuity, having your pension paid periodically, is in many cases a choice over there instead of an obligation, like it is in the Netherlands. That is to say, if you receive pension at all. “There has been an enormous trend in the US from collective to individual systems, or even no pension system at all. The public pension funds that still exist, are of states and cities. Some cities have already gone bankrupt.”
One of the related causes is the weak legislation, says Bauer. “There are guidelines in place, but the funds have a lot more freedom to do whatever they want. That’s a big problem. They are allowed to take too much risk which means they can achieve high yields, but also suffer major losses.”
Moreover, the funds in the US work with a much more optimistic calculation of the coverage ratio, but even with that calculation method it is way worse than in the Netherlands. Bauer: “The largest pension fund of America has a coverage ratio of approximately 70 percent. But if they would calculate the coverage ratio according to the Dutch legislation, it would only be 30 percent.”
Bauer believes that Americans find us too strict in the Netherlands. “You could say that we act as if the world is ending, while they act as if nothing is going on.”
UK and Denmark
The United Kingdom, ranked at the 14th position, is not performing much better than the US. The UK has also made a move from collective to individual, says Bauer. About five years ago, pensioners there were given the freedom to withdraw their pension after the age of 55 in one go, instead of having it paid every month for the rest of their lives. Bauer is horrified by this ‘Lamborghini pension’. “We have arranged that a lot better with our mandatory annuity. It is the smartest choice economically speaking.”
In terms of the system, the English scheme is closest to the one in the Netherlands, according to Steenbeek. People save money through their employer and the employer also contributes. “However, a large part of the population is not covered by a pension scheme.” Where 90 percent of the employed people in the Netherlands is affiliated to a pension fund, that percentage in the UK, but also in countries such as the US and Canada, is only about 40 percent. Another fact is that the English only put 8 percent of their income aside (the employer pays half), while that’s approximately 20 percent in the Netherlands.
Denmark has a high score internationally speaking, with a second position on the ranking. They mainly owe that position, according to Steenbeek, to the fact that they have a state pension in place, the same as our AOW, a well-organized and financed collective basic pension for every resident. Besides that, most of them have a supplementary pension, linked to income and assets.”
The problems we see in the Netherlands, are also observed in other countries. Ageing is a problem almost everywhere, as is the low interest rate.
There are many countries that could use a thorough reform of the pension system, but it’s political suicide to bring that up, says Steenbeek. “That’s happening in France, for instance. They are doing really well over there at the moment in terms of adequacy. The pension is generous, but not durable. This system is based almost entirely on turnaround and due to the increasing ageing, less and less employed people are paying for more and more pensioners. But as soon as you start fiddling with the system and suggest that people have to retire later because it is no longer affordable, people are hitting the streets and the entire country comes to a standstill. Implementing such reform is actually only successful in times of a crisis.”
Bauer is ‘cautiously positive’ about our new pension agreement. He doesn’t expect it to jeopardize our number 1 position, but he has still to see how it will look like in practice. “The generation discussion has not ended yet with the new agreement. And will we now all of a sudden abide by all the rules we came up with to reduce the pensions if needed? If everyone – including politics – sticks to the agreements made, it is a progression.
Steenbeek also doesn’t anticipate that the new system causes us to lose points. “The problems we see in the Netherlands, are also observed in other countries. Ageing is a problem almost everywhere, as is the low interest rate. The pension paid to the current pensioners, is probably less feasible for future generations. It is no longer as evident as it used to be, but we will continue to score well on durability. The adequacy may lapse a little, but we are in quite a generous position compared to many other countries. And we will score better on clarity because the new system is much more transparent.”
The fact that we score so well right now, doesn’t mean we can rest on our laurels, Steenbeek emphasizes. “The system, in the way we came up with it, is actually not resistant to the world of today, with low interest rates, lower expected returns, an increasing amount of people who are not accruing any pension at all, and a business community unwilling or unable to pay very high premiums. We are unable to live up to the generous promises we made. We have saved an enormous amount of money, but something has to happen in order for us to continue our ranking in first position.”
How are other European countries doing?
We’ve already mentioned Denmark, France and the United Kingdom. But how is pension arranged in other European countries? The website consultancy.nl clearly maps this out.
- Germany - # 11 on the Global Pension Index
They also have three pillars beyond our eastern border. Although the first pillar - compulsory for all workers - makes up about 80 percent of all pensions in the country. Germany has been working with a points system since 2002. Every worked year earns points, which are eventually converted into pension. The more points you earn, the higher the payout. Legal retirement age? 67 years.
- Belgium - # 16 on the Global Pension Index
Just like us, our Belgian neighbors have three pension pillars: a "retirement pension" for everyone who works, an "extra-legal" pension that you collectively build up with your employer and a private savings plan. At the time of publication of the article on consultancy.nl (2017), that retirement pension amounted to an average of about 60 percent of the average earned wages and is based on pay-as-you-go: contribution payers therefore directly finance the pension benefits of pensioners. The legal retirement age is now 65 years, but will rise to 67 by 2030.
- Spain - # 22 on the Global Pension Index
Main pension scheme in Spain is a compulsory government pension. It is striking that low and middle incomes receive a fairly high percentage of their earned wages as pension: no less than 90 percent in 2017. Here, too, the pay-as-you-go principle applies: workers use their contributions to finance the pension of the elderly. Legal retirement age in Spain is 65 years, but will rise to 67 by 2031.
What do employees think of the fact that their pension payments may fluctuate under the new pension system, depending on investment returns? And what other questions do they have? To find out, APG interviewed a select group of people over the age of 55.
The Dutch pension system is undergoing changes. Under the new system, pension payments may change every year, depending on the returns of the investments made by pension funds. What questions do employees and retirees have about this? APG wants to know, so that it will be able to inform participants about the new pension system as accurately as possible. To gain more clarity, APG had extensive conversations with fifteen employees (between the ages of 55 and 65, who had various degrees of knowledge of both the current and the future pension system). According to Joyce Augustus, researcher at APG, to some of the interviewees it makes sense that the current pension system is simply no longer sustainable, now that people’s life expectancy has risen, and the population continues to age. “But they don’t really like that the pension payments may change every year. That gives them a sense of insecurity and dependence on the pension fund.”
More insight into personal pension assets
In the new pension contract, you will be able to see more clearly what the returns of the pension investment are and what the costs are. In other words, there will be more transparency. Augustus: ”Everyone experiences that as positive. At the same time, this transparency also leads to questions, for example, about those returns and those costs.” The interviews also revealed that most people realize that their pension payments will fluctuate more than they do now and that under the new pension system, more can depend on the investment returns and the economy. Pension funds may make additional choices, however. The investment results can be included in the design of the pension system, so that it matches the preferences of the participants more.
“Some of the people we spoke to reasoned that they will now become more dependent on the investment qualities of the pension funds and that the fund must be held accountable for this.” According to Augustus, some people APG spoke to want an explanation if they see that their pension fund had a negative investment return in a particular year, which will result in a decrease in their pension payments. “They are comparing the pension fund’s revenues to the revenues of other financial agencies, like a saving account at a bank or someone’s own investment account.”
Jargon should be explained
This research also showed that pension jargon can cause a lot of confusion. Take a word like “solidarity buffer”, for example. Many people think that this means there is a “pot”, so that everyone will be able to receive their pension. A sort of solidarity from high incomes to low incomes. That is not the correct understanding, Augustus says. “A solidarity buffer means that we can save and reserve some of the investment returns from economically good years, so that we can use them in bad years to keep paying out the pensions. It is therefore very important to use communication that makes sense to the participant. Even though ‘solidarity buffer’ is technically the correct term, the participants are interpreting it differently. It is therefore better if we use a different word. Another example of where respondents feel the need for an explanation: in the new system, the returns will be ‘apportioned’ according to age. This means that young people will be apportioned more returns, positive or negative, than older people. This was devised to lessen the risk for older people, so that their pension payments will not fluctuate too much. Augustus: “The seniors that were presented with this without any explanation, could not understand why this should be so. They thought it was unfair. But once they heard the argument, they had a better understanding.”
Pension funds and administrators like APG should therefore always ensure they use comprehensible communication, Augustus emphasizes. “That is why we are testing in advance to see if our letters, newsletters and other communication to the participants and pensioners is comprehensible. And where needed, we want to keep refining it until it is comprehensible. We consider that to be part of our responsibility.”
What else is APG going to do with the results of this research? Augustus: “We have more of an idea now about what kinds of questions the new contract evokes when we communicate about it. And we are even more aware of the fact that certain terms or concepts evoke questions or can be interpreted the wrong way. We are looking at how and how often we are going to inform our participants about the new pension system. Not too often, because most people are not interested in a detailed explanation. But often enough so that there will be no misunderstandings.”
And did the interviewees have any advice for APG? “Yes, they want us to inform them clearly and personally. And they want us to take good care of their money.”
This is what people over 55 think of the new pension system:
- It is understandable that the current system is not sustainable now that people are living longer.
- The new pension system is much more transparent.
- But it is also less secure, because their pension payments may fluctuate, depending on the investment returns and the economy. On the other hand: pensions are currently fluctuating too.
- The dependency on (the(investment performance of) their pension fund will feel greater.
- Participants therefore want more insight into the investments. Pension funds should also be held accountable if the assets drops.
- The solidarity buffer and the fact that younger people will receive a higher return both require explanation.
- The new pension system requires good – clear and regular – communication from the pension funds.
Collaborative project pension world offers insight into (future) finances
On the day it officially goes live, it also wins an award: the Pension Checker app. The tool is the product of a collaboration between several pension funds, led by the Pension Federation. The ABP / APG Experiments Team developed the prototype.
The Pension Checker provides easy insight into how much pension you will receive in the future. And today, during the last day of the Pensioen3Daagse, it won the PensioenWegwijzer award.
How much pension will I receive later? How long do I still have to work? Can I retire earlier? The Pension Checker, which can be downloaded from today, provides immediate answers to these and other questions. The advantage of this app is that it offers a complete overview of the pension. So including AOW and 'pension funds' accrued with other funds.
The application originated from an initiative of the Pension Federation and Dutch pension providers and large pension funds such as ABP and APG. Today it was officially launched at the end of the Pensioen3Daagse and thus won the Pension Guide 2020. This prize is awarded for initiatives that make it easy for people to gain insight into their pension and, where necessary, to take action.
The Pension Checker can be downloaded free of charge from the Google play store or the App store. Logging in is done as follows:
- Log in with the DigiD;
- Check the net monthly amount of AOW and pension;
- See what early retirement means financially;
- Discover what extra savings will bring.
Four major pension providers, APG, Blue Sky Group, Nationale-Nederlanden and PGGM, are today launching Mijnwaardeoverdracht.nl. The new website is the result of a unique collaboration between platform developer Hyfen and the implementers. The joint initiative optimizes value transfers using innovative decentralized technology. Already about fifty percent of the participants can use the platform. In the near future, more pension providers will join the platform, which will further increase its reach.
A value transfer is the transfer of an accrued pension pot from a previous job to the pension pot of a new job. Until now, arranging a value transfer has been complicated and time consuming. With Mijnwaardeoverdracht.nl, this will change. The site connects the administrations of parties in the pension sector with decentralized technology. In this way, all the information is available at once to compare the various options and to transfer the pension.
The platform is one of the first blockchain-based applications available to the general public. The participating parties jointly designed the platform. Because all parties exchange the necessary information in realtime, they reduce the turnaround time of a value transfer from nine months to approximately thirty minutes. In a clear step-by-step plan, the pension saver compares the current and old pension scheme and can thus make a well-considered choice. The decentralized set-up also safeguards the privacy of users of the platform. This has been determined by independent auditors.
Hidde Terpoorten, manager of Hyfen: “We are proud that with this collaboration we are showing that you can speed up and simplify a process for the pension saver, while achieving efficiency at the back end. The success of this collaboration is inspiring: together we can do more for the pension saver.” We are investigating where this philosophy can be put to further use. For example, one of the following developments is proof of being alive (attestation de vita), which requires pensioners abroad to make an expensive and sometimes dangerous annual trip to an embassy. A digital app then makes it possible to provide this proof once. This can then be shared with the required parties, instead of the participant going through the currently lengthy process with each party separately.
Francine van Dierendonck, member of the APG Board of Directors: “Mijnwaardeoverdracht.nl is a fine example of innovative services. Participants of already affiliated pension funds can quickly and easily arrange their value transfer using a smartphone or a tablet. I am proud that Hyfen, as a spin-off of APG, has succeeded in establishing this unique collaboration within the pension sector.”
Luuk van Tol, Manager of Pensioenservice Blue Sky Group: “It’s great that we got to participate in an award-winning project. It is a win/win situation for both us and for the participant.”
Laure van Waardenburg: IT Manager at Nationale-Nederlanden:”This initiative has enabled us to create an innovation in a unique way, with other pension providers, in which we can support participants in making the right choices for a financially secure future as easily as possible. We are proud to be the first insurer to contribute to this.”
Alexandra Philippi, Chief Operations Officer at PGGM: “PGGM wants to make it as easy as possible for the participants of our clients to arrange their pensions. Including for making the transition to another pension fund. Mijnwaardeoverdracht.nl is a very useful and innovative platform for this, which we were happy to help develop. Pensioenfonds Zorg & Welzijn is the first of our clients on the platform and we hope that other funds will follow, so that even more people can benefit from it.”
As of today, anyone can use Mijnwaardeoverdracht.nl by logging in with DigiD. Half of the participants who are accruing pensions can already find his or her pension provider on the platform. In the near future, more pension providers will join the initiative, which means that more and more participants will be able to use the platform for their value transfer. Pension provider AZL is the next pension provider to join. The platform should soon be the preferred place to handle value transfers.
Hyfen is a spin-off of APG, which was positioned independently earlier this year:
What the American elections (could) mean for our retirement
Like a pebble in a pond, events on the other side of the world affect our economy. This is especially true for developments in the US, still the most powerful nation on earth. Will the next president also determine the coverage ratio of Dutch pensions?
The global economy is a cohesive whole in which changes in one country can have a major impact on another. Global stock markets often react to events in the US and to statements made by US politicians. “It is a very important country from many economic perspectives,” Rabobank’s chief economist Menno Middeldorp recently said on BNR News Radio. “America is one of the largest economies in the world. In addition, we have more of our investments and pension funds in America than in any other country.”
Eyes and ears
When something changes in the US - for example due to elections – then, as an investor, you can notice it, confirms Thijs Knaap, Senior Investment Strategist at APG Asset Management. “Even if you haven't invested one dollar in the US. Even if you buy a purely Dutch company, such as Philips or Aegon, you still have to deal with the fact that these companies are active all over the world, including - for a substantial part - in the US”. As a global investor, APG is active in the US, of course. Rajiv Mallick, Head of Risk Management, US, says that APG-US manages $108.3 billion (September 2020) for APG and its Dutch clients. From New York, he says: “Our pension funds and their participants benefit from extensive local investment expertise”. He describes the office as the “eyes and ears” of APG in the US.
Shocks and trends
The Dutch financial interests in the US are substantial. However, creating a link between the election results and the consequences for our economy - and thus our pensions - is not that easy, according to Knaap. “Between the elections and the Dutch pensioners there is quite a bit of static on the line. Although it sometimes seems as if politicians have power over the economy, their influence is actually limited. A lot depends on economic shocks and trends”. Nevertheless, presidential elections do have an effect. Knaap remembers that the (unexpected) victory of Donald Trump in 2016 led to a rise in US interest rates. Investors expected the government to borrow more and that this would lead to inflation. The first thing happened, the second did not. Because of this expectation, the US 10-year interest rate at the end of 2016 was more than half a percentage point higher than just before the elections. Because interest rates respond to each other globally, the funding ratio of Dutch pension funds also increased as a result. This enabled many funds to avoid a discount.”
Given the interests at stake, investors are closely following the U.S. elections. Mallick is too. “We are carefully monitoring potential policy changes in several sectors, including healthcare, energy, finance, education and taxation. After all, one president is not the same as the other. An example: when Trump won the previous elections, he reopened the coal mines that his predecessor Barack Obama had just closed for environmental reasons. Heavy industry benefited. Joe Biden, as a Democrat, could undo that.” What Knaap pays particular attention to is the influence of America on global growth, and on international relations. “Trump has reduced corporate regulation and lowered taxes. At least in the short term, this is good for growth and for the profits that are ultimately shared with investors. In the longer term, however, you may wonder if we don’t need the rules for preserving our environment just as much for healthy growth.”
If Trump gets to stay, it is very likely that he will continue to implement the protectionist measures based on his “America first” policy. This could have consequences for the turnover and shares of Dutch companies, whose access to the large American market would then be impeded. World trade would also suffer as a result. The stock exchanges virtually always react negatively to such impediments.
Knaap is seeing that America has played a much smaller role in many international contexts under Trump in recent years, while tensions with China have increased. This incapacitates institutions like the WTO (World Trade Organization). “For the upcoming elections it seems to be a choice between a continuation of this policy and a - partial - return to the old situation.”
More attention is being paid, however, to a “blue wave”: a victory for Biden, with a majority for the Democrats, the “blues”, in Congress. Investment Manager Simon Wiersma gives a prediction on the ING website that the Democratic support and stimulus packages could lead to a broad stock market trend of investors who want to anticipate economic recovery. “No matter who wins, the financial market will be affected by the elections either way.”
Research conducted by the U.S. Bank over the past 90 years shows that the stock market rises by an average of 6.5 percent in the year after a president is re-elected, while growth with a new president is only 5 percent. But the bank also concludes that equities do much better under a Democratic president than a Republican in the longer run.
Finally, we ask strategist Thijs Knaap to outline 2 scenarios: what are the financial prospects under 4 years of Democrats and under 4 years of Republicans?
It seems that the Democrats are looking for more international cooperation again. The inequality, which has continued to increase under Trump - although the trend has been going on for much longer - could possibly be reversed by Biden's plans for a higher minimum wage, among other things. Investors seem to think that this could boost spending in the U.S., and thus growth. Because the return on investments must ultimately always come from economic growth, that could be good for our participants.”
The Republicans seem to be planning to build a different model than the one we entered the century with. That model is more bilateral (America trades with countries, not as part of coalitions) and transactional (“quid pro quo”); not based on rules. A consequence of that model, at least under Trump, is unpredictability of policy. In general, investors are not very keen on this, because it discourages investment”.
Keep working till you are 67 and then enjoy your old age. Or could it be different? A search for Plan P: updated ideas and alternative scenarios for organizing your life, your work and your retirement. A shift in thinking for and by young and old.
Pieter Hilhorst advocates for using younger seniors in society “Use the hidden power of the vitalos”
We’ve been familiar with the “older young person” since Van Kooten & De Bie: those Koos Koets types, like over-age hippies. Now we’re also seeing the “younger senior”. Description: Roughly between age 65 and 80, often still fit and living independently, socially active as volunteers (average 7.4 hours/week), caregiver (12.5 hours/week), babysitting grandchildren, or even gainfully employed (225,000 people). Vitalos is the name readers of the daily newspaper Trouw came up with for this group, in a competition.
Extra phase of life bonus
The vitalos are in the “third Phase of life”: after their youth and their career, and before the start of the fourth phase of life, from age 80 upwards, where health becomes increasingly fragile and the need for care and support increases. And they are increasing in numbers: from 2.4 million in 2018, to 3.2 million in 2040. That third phase of life is a “bonus” thanks our increased life expectancy: for 65-year old men another 19 years (and 12 years on good health), for women as much as 21.5 years (and 12.6 healthy years). ‘The bonus of the century’, according to the Raad voor Volksgezondheid & Samenleving (RVS)(Council of Health and Society), provided similar advice at the beginning of this year. Pieter Hilhorst – whose roles include former alderman of Amsterdam – spoke to many vitalos, as a council member and project group chair. “Each of those conversations was inspiring.”
Vulnerable senior versus passionate pensioner
Those extra years of vitality are not only a bonus for the young seniors themselves, but also for society, the RVS advice states. We are struggling with scarcity in the job market, stagnation in the housing market and an increasing pressure on care costs and capacity. Voluntarily staying employed longer, forms of shared housing and shard care and financing during the third phase of life, could be a solution to that. The vitalos themselves often want to stay active, Hilhorst says. He feels the current image of seniors is too black-and-white and somewhat of a cliche: on the one hand the vulnerable and dependent elders and on the other hand the hedonistic (early) pensioners.
Choose for yourself and matter
In reality, the group of (young) seniors is more diverse in nature, says Hilhorst. Some of them just want peace and quiet and some of them still want to contribute to society. “People in the third phase of life care about autonomy and connection and they want to matter: making their own choices, having contact with others and remaining meaningful. We’d be insane as a society not to use that potential. We should use that hidden power better, only our systems are not set up for it.” The government, pension funds, housing corporations, care institutions and companies: they should all facilitate more flexibility and remove obstacles. What needs to change?
1. Keep working, but differently
Current typical career path: a full-time job, followed by abrupt full-time retirement. Hilhorst thinks we should change that: “The choice between working or not working should be extended to the option to keep working more or less, even after retirement.” For example, in a bridging job, where older employees can keep doing similar work: at a lower rate, but with flexible work hours. Hilhorst: “Employers should offer more flexible contracts, so that seniors can alternate a period of working with, for example, traveling.” Another idea is senior internship: hiring seniors on a temporary basis at companies, or volunteer organizations, so they can transfer their experience or when there are capacity problems. During the corona crisis, for example, hospitals and care homes put out a call to retired care professionals.
2. A different pension plan
To make the vitalo job market possible, pension funds (and tax authorities) should have a more flexible approach, Hilhorst believes. He cites the example of a 79-year-old teacher who previous had fully retired, but then changed his mind: “However, it was not possible to undo it. When he started working again anyway, it cost him a lot of pension assets. We shouldn’t punish people for working longer; we should stimulate them to keep working longer.” Hilhorst says that would require more flexible pension plans, which seniors can switch on or off, if they stop working after they’re 67 or if they want to stop temporarily: sometimes you earn more and need less of a pension, and sometimes it’s the other way around.
3. Different housing
90 Percent of the vitalos has a single-family dwelling with three rooms or more, a million of these people are single. Loneliness lurks and on your own it is harder to keep living independently. That requires new forms of housing, where seniors can live together, either in a “Knarrenhof” situation, with peers, or with other generations. “Co-housing can lead to new contacts and people can take care of each other,” Hilhorst says. That can decrease loneliness and save on care costs. Plus, it would free up housing for starters and families sooner. Housing corporations therefore need to create more options for age-proof co-housing, according to Hilhorst. He sees a role for pension funds too: “Financing these types of shared complexes is often difficult. Pension funds, for example, could provide mortgages to participants that want to live in shared accommodations.”
4. Providing care differently
Civic initiatives, such as care coops, can also facilitate seniors living independently for longer, in their own homes or towns. The vitalos often work as volunteers and could use that support themselves down the road. The growing and aging groups of self-employed people are increasingly taking care of each other, for example, through Broodfondsen (bread funds): when members are sick, they get paid from the joint savings. Self-employed people often do not have a pension and have to keep working longer. Once they are eligible for Old Age Pension, they can still stay on as members of the bread fund Hilhorst co-founded ten years ago. “That certainly was cause for some discussions among the younger members at first. But if people keep working, they should also be able to continue their disability and sick leave insure. So, we adjusted our rules. This is a nice illustration of the social change we are currently seeing and the new way of thinking that was needed in the Netherlands.”
“Nothing is mandatory”
Don’t the young seniors experience all those recommendations for working longer and taking care of each other as patronizing and extra pressure? They are already the first generation that can’t retire before age 67 and now they’re being asked to do even more? “It is absolutely not intended to force people to work longer or to take a social role,” Hilhorst responds. “We only want to make it easier for people who want to. Nothing is mandatory and hopefully, there will soon be more options.”
Just like in 2019 and 2018, APG's largest client ABP leads the Dutch VBDO sustainable pension fund ranking. The Dutch Association of Investors for Sustainable Development (VBDO) announced this today at the presentation of the VBDO Benchmark on Responsible Investments.
ABP scored 4.3 out of 5 points. APG's other asset management clients also performed well. BpbBOUW consolidated its second place with a 4.0 score. SPW went from fifth to sixth place (3.2 points).
Every year, VBDO examines the performance of Dutch pension funds’ responsible investment policies. The benchmark assesses the 50 largest pension funds in the Netherlands, accounting for 92% of assets managed with a total value of more than € 1.4 trillion.
Raising the bar
VBDO again raised the bar this year. New criteria were, for example, engagement with governments and reporting on positive and negative impact.
For more information, please download the full VBDO report here.
Needed: Data Analyst (M/F). Offered: a good salary, plus thirteenth month, with possibility of permanent contract, travel allowance and/or (electric) company bicycle and flexible work hours. What is missing from these employment conditions? Hint: it is very important and starts with a P.
Column Francine van Dierendonck, member of the board of directors APG
At the beginning of this year, we did some research: we looked at 300,000 job opening texts. Only 5 of them mentioned a pension plan, even though, after the salary, the pension plan represents the highest value in the salary package: an employment benefit that can be up to thirty percent of the wage expenses. So, that seems a little strange. Especially because pension certainly continues to be an important factor when people are looking for a new job: as much as 92 percent of Dutch employees and people looking for work expect their employer to organize the accrual of their pension. Many of them do not opt for an employer without pension accrual (or the possibility of a permanent contract).
This is one of the surprising outcomes of the National Employment Conditions Survey that APG conducted last spring among seven thousand employees and people looking for work, in collaboration with Intermediair. The work-life platform for the highly educated is a component of DPG Recruitment, a big player in the Dutch employment market and a component of publishing company DPG Media (previously the Persgroep (Press Group)). It was a logical partner for this survey: they contributed knowledge about the employment market, and we, as the administration organization for pensions, brought: income for the future. Pension and employment are inextricably linked to each other. If you don’t work, you’re not accruing a pension.
So, a pension plan is, apparently, an important selection criterion for Dutch employees. Eighty percent of employers do offer a pension plan and spend a lot of money on it. You would expect that they would loudly advertise that, but in fact, it is barely mentioned, or not at all, or just as an afterthought. Oh, and by the way, we also offer a good pension plan. It is therefore not surprising that fifty percent of employees say they don’t know the content of their pension plan. Sixty percent doesn’t know what portion of the pension premium is paid by the employer, even though that is usually (much) more than the portion they pay themselves. And, incidentally, people apparently also don’t know or know very little about what other benefits employers provide. A membership to the gym? One in three employees doesn’t know about this. A bicycle plan or a personal training budget worth hundreds of Euros? One in five employees has no idea.
This lack of insight into secondary employment benefits is very unfortunate. First of all, for the employees themselves, who are not getting everything they can from their (future) job. As a candidate, ask about the pension plan and other benefits during your job interview, as en employee, talk about it with your coworkers, look it up on the intranet. For employers, it is also a missed opportunity. As an employer, inform your people that you have a pension plan and what it entails. That way you can positively distinguish yourself in the job market and contribute to the satisfaction of employees. Let people know not only how much they are (or will be) earning, but also how much income is being accrued for them in the future. And make sure this is done in net amounts, so that people can get a realistic picture of what their financial future looks like. Say, for example, you want to stay where you are currently living after you turn 67. It will definitely matter what your monthly income will be at that time, to ensure you will be able to. Almost fifty percent of employees doesn’t know if they will receive fixed or variable pension payments in the future. And right now, we are facing a new pension contract, in which the individual and variable pensions are going to be playing a bigger role.
I would therefore like to appeal to Dutch employers: communicate about pensions and other employment benefits more often and better. Realize: the employee does not exist. Women, youth and people with limited education often know less about pension, research has shown. That demands a customized approach. And don’t forget about a good work-private life balance and happiness at work. People want to enjoy their work and in addition, they want more time for themselves and their families. They are prepared to make substantial financial concessions for this: another eye opener from the survey.
It’s all about life and income for today and in the future. Employers can help employees create the right balance in this and at the same time they can be developing a better position for themselves in the job market. But for that to happen, the employer’s contribution must become visible – both literally and figuratively. In the past, you would sometimes see a sign in stores: if you don’t see what you are looking for in the store window, inquire within. The point is that people often don’t know what they want. They won’t come in to ask for something they don’t even know exists. So, display the pension plan prominently in the window, preferably near the front. Needed: Data analyst (M/F), offered: a good salary plus thirteenth month, possibility of permanent contract and an excellent pension plan ...
Pension is an important factor when people are looking for a new job. However, people often don’t know how the pension scheme offered looks like exactly, as evidenced by the National Survey on Employment Conditions. Joyce Augustus-Vonken was involved in the survey from APG: “Employers have to make their employees more pension-aware.”
We work for our pension at least one day per week, but, oddly enough, we are barely aware of that fact. Yet, we believe a good income for later is important: we are hesitant to pick an employer not offering a pension scheme as shown by the National Survey on Employment Conditions. APG conducted the research together with Intermediair, a work-life platform for those with a higher education, among about 7000 people; employed people and jobseekers. Joyce Augustus-Vonken, researcher at APG, spent a lot of time on the survey these past months, together with colleague Eduard Ponds. A big job that provided plenty of insights on how important pension is considered by the Dutch in the total package of employment conditions and what they know about the topic.
Why did APG conduct this survey together with Intermediair?
“At APG, we are eager to know how people think about their income for now, later on and in the future: what do they perceive as important, what are the choices they make? That knowledge enables us to respond more effectively. This survey specifically involved Dutch people who are working and who are looking for a job. Pension is an important employment condition. Employers pay an average of two-third of the premium for their employees, some pension funds even pay the total amount, but in some cases employers pay less than half. We were curious to know if people actually pay attention to the above details when looking for a new job or in their current job. Are they aware of the value of this employment condition and of the differences between pension funds?
“The salary continues to be the most important employment condition which is only logical. But pension also appears to be an important factor when making the choice for a new job. No less than 92 percent of the employees and jobseekers expects their employer to arrange the pension accrual. Conversely, the lack of a pension scheme contributes largely to the decision on whether or not to opt for such employer. The same applies to no perspective of a permanent contract for that matter. Not offering these employment conditions therefore truly is a no-go for employers.”
Should the employers offering a good pension scheme emphasize this more on the labor market?
“Employers can highlight their pension scheme more in job ads and during the application process, but also to their existing employees. Conversely, employees could also raise the topic of pension more actively in job interviews and conversations on employment conditions. And not only ask the question whether or not a pension scheme is available, but also the height of the pension and how much premium he/she and the employer are actually paying on it. Because that is also showing from the survey: people find it important to actually accrue pension, but the height thereof seems to be of lesser interest. Most people are quite happy with a pension that pays 50 percent of their current gross monthly salary in the future. Higher pensions contribute to the attractiveness of the package of employment conditions, but the higher the pension, the less added value people relatively allot to it. That mainly applies to an increase of the pension from 70 to 90 percent of the gross monthly salary: in that case, people often perceive adjustments in other employment conditions as more important. Even though that could make a considerable difference in the pay-out later on.”
The survey also shows poor knowledge on pension. Is that related to the above?
“Nearly sixty percent of the respondents does not know what part of the premium is paid by the employer. Also remarkable: almost half of the interviewees don’t know whether they will receive a fixed or variable pension payment. People perhaps think too often: I am accruing pension and this means everything is well arranged. They rarely wonder whether they will have enough income later on, or that’s it is time for them to arrange something extra. Women appear to be less knowledgeable on the situation of their pension compared to men.”
Almost half of the interviewees don’t know whether they will receive a fixed or variable pension payment
Does that have to do with the fact that women work part-time more often? Or do men just say that they know the ins-and-outs, even when that’s not the case, while women are less convinced about their pension knowledge?
Laughing: “That was not in scope while conducting the survey. That could perhaps be a great subject for a follow-up survey.”
Does the survey also show differences between older people and young people?
“Older people are often more informed about their pension than younger people. They also responded differently to the choices we presented them, such as the choice between 15 percent additional salary or 40 percent additional pension. Overall, approximately half of the respondents would opt for additional salary and about half for additional pension. You see a difference when you zoom in on the young and the old. Nearly 60 percent of the young people would opt for that 15 percent more salary as opposed to only 40 percent of the older people. This is only logical: older people are closer to their pension, while it is still far away for the young people.”
What was the outcome of the survey that was most surprising to you?
“The major importance people attach to flexible working and a work-life balance. 60 percent would be prepared to accept an additional salary cut of 15 percent and an additional pension cut of 40 percent to achieve this, provided that pension is still accrued. The interesting part is that this applies across the board, although women and higher educated people slightly more often favor a package of work-life balance rather than a financially more attractive package. This means people are prepared to make substantial concessions in order to gain time more for themselves and the family. 40 percent more or less pension: that makes a big difference. The question is whether people sufficiently realize the consequences.”
Has that outcome been affected by the fact that many people were working from home during the survey?
“That could well be the case: during the time of corona people perhaps noticed the importance of a good work-life balance. People may possibly also attach more value to a permanent contract as a result of the increasing job insecurity caused by the crisis.”
What can employees and employers do in practice utilizing the results of this survey?
“We summon employers to make their employees more pension-aware: don’t only look at the income now, but also at the income in the future. One in five people say they don’t even know whether or not they are satisfied with their pension accrual. So, the knowledge on pensions has to increase. Employers could possibly also build in more freedom of choice between salary, flexible working and pension. And, as said, pension can be leveraged as an advantage in a competitive labor market. Make it clearer what value you are offering in terms of pension and the other employment conditions, because the latter are also not known to everyone, so it appears. This could represent a missed opportunity for employers to create more satisfied employees.”
Finally, you also looked at job satisfaction. How important is that?
“60 percent says to be satisfied with the current job. The most important reasons: challenging work and nice colleagues. A good atmosphere and the salary are listed at a shared third position. Job satisfaction therefore appears to be more important than the secondary employment conditions. But that’s only natural. You are engaged in your work every day, so it is important to also enjoy yourself. That cannot be beaten by salary or pension.”
From the Tour de France to the World Cup. And now, from the Giro d’Italia to the greatest classic in the late season. Due to corona, there is cycling nearly every day. Bobbie Traksel, former professional bicycle racer, TV commentator at Eurosport and president of cycling association VVBW, wants to seize the crisis time to better guide and coach cyclists in things like their pensions and their rights. Because, for many cyclists, that is not a luxury. “It is a misunderstanding that all cyclists earn buckets of money.”
Bobbie Traksel stands up for his cyclists. There is a small group of top earners of the Tom Dumoulin and Matthieu van der Poel caliber, but 60 percent of professional cyclists makes less than 50,000 Euros a year. Traksel wants to do much more for that group. “We really want to develop something for those people. An economic crisis is looming, the world is changing rapidly, politically and socially, and we also need to put energy into the financial future of our youngest racers. What we would like best is an order from the KNWU to train young cyclists on the continental level -semi-professional – in finances, rights and the political landscape in the world of cycling. We can also teach them independently. Most cyclist discuss these kinds of things with their personal managers. A personal manager doesn’t always give independent advice either. We would like to have a much more of a grip on this.”
The “post-career fund”
After the sometimes forced end of their cycling career, professional cyclists often fall into a hole. “They’re suddenly out of work, with no income and most cyclists have not earned enough to build up a buffer. It is a misunderstanding that all racing cyclists earn buckets of money,” Traksel explains. “There are just a few of those. Most cyclists left their education in order to fully focus on their cycling careers.” Cycling association VVBW came up with the idea of the “post-career fund” for these cyclists. This is used to help cyclists after their cycling careers have ended. By opening three funds, the VVBW is helping seriously injured, unemployed or discontinuing cyclists with financial support and, for example, finding a job. First of all, there is the co-called CFK fund. That is a unique arrangement in which professional cyclists and soccer players are mandated to invest a portion of their gross income into a personal participation fund. They don’t have to pay taxes or social premiums on this investment. As soon as their professional careers end, they receive a bridging pension from a second fund for a few years. And the third one is a solidarity fund that was founded by the international cycling federation UCI and is managed by the international trade union CPA. Cyclists receive an extra 10,000 to 15,000 Euros after their careers have ended. This helps them to survive the first period and allows them to focus on work or education. It also allows them to wait for that great job they had always wanted. This is important and necessary.”
Furious top cyclists
Only, an uprising erupted between 300 top cyclists and the CPA. The trade union is seen by top riders as a puppet of the international cycling union UCI. Former cyclist Stef Clement has this to say about it: “There was no membership meeting in 2019, even though that is required. And there is something else that is noteworthy, and that is that only 25 percent of pensions is being paid. Our group believes that the cyclists play a central role in cycling and that they should therefore be adequately represented. So, we want more transparency.” The international pension pot is being filled with proceeds from the World Tour races. The cyclists are furious and top cyclists, such as Robert Gesink and Chris Froome, along with 300 other cyclists have threatened legal action.
Barely thinking about financial future
Creating a financially worry-free future is not that easy, says Bobbie Traksel. Especially because young cyclists are barely thinking about their financial future. “Whatever they have to do themselves with respect to that is generally not done by the cyclists. For many young cyclists, the future is very far away. That is why we want to include cyclists at the beginning of their careers and educate them. Cyclists generally have a short career. So, cycling yourself into financial independence is something that is achieved by only a very small group. That is why as VVBW, we are so happy with the CFK fund and we hope it will continue. There is a lot of support for cycling there. It also has fiscal benefits. Cyclists also notice it less, because teams deduct this from their gross income on a monthly basis.”
Between a rock and a hard place
But Dutch cyclists that are in foreign teams will still get into financial trouble, if they’re not careful, Bobbie knows. “As well as Dutch cyclists that are part of a Dutch team but live abroad. They cannot use the CFK program. And there are quite a few of those. Dutch cyclists move to places all over Europe, for training-technical reasons. From Monaco to Andorra. But the CFK program is an explicit agreement with the Dutch tax authorities.” And that is the reason that many professional cyclists end up between a rock and a hard place. Bobbie: “If you are racing abroad and you opt for a contract with a Chinese team, for example, you are not only not eligible for the CFK fund, but when you’re done, you’re also not eligible for unemployment benefits. And that also applies to cyclists who live in, for example, Belgium, have independent contracts and have to deal with mandatory Old Age Pension payments.”
Going for it
So, the question remains: are many cyclists at risk of falling into a financial black hole after their careers? “I’m not getting that feeling, as yet. However, professional athletes in general and cyclists in particular are often young men who have goals they are working towards and who know what it means to work independently. They enjoy going for it. I think cyclists are good candidates for the business world because of their goal-oriented and performance-focused approach. Not many cyclists have a hard time find a job working for a company, but that doesn’t mean they have also made good plans for their retirement.”
Who are the people answering your telephone call when you have a question about pensions? And who are the people ensuring that you receive your pension statement every year? What are the underlying factors in making sure there is enough money later on for your pension payment? We take you with us to have a look behind the scenes.
Steffie van Gils (34) is customer experience manager at APG.
Isn’t it boring to work in the pensions industry?
“Absolutely not! Pension is crucial in one’s life. It involves money you have worked for many years and, if all goes well, continue to live on for many years to come. Applying for pension is a once in a lifetime event. It is a huge moment in one’s life and has great impact. I truly enjoy, together with my colleagues, ensuring that everything is arranged as well as possible and that people know where they stand, resulting in them taking that step feeling safe.”
But this probably wasn’t the job you dreamt of as a girl?
“LOL, no, it wasn’t. Other professions were much more tangible back then. I was trained as a journalist and started doing more work in marketing and communication as a freelancer. After I moved to South Limburg, I ended up working for APG in Heerlen. So, this job really crossed my path. We are now five years down the line; I enjoy it so much more than I anticipated.”
What is it that you do exactly, as a customer experience manager?
“I am involved in everything to do with customer perception and customer experience. From customer experience, CX, we look across all departments with the view of the participants: how are the services experienced by them? Letters, website, the answer given on the telephone, it all has to be one logical narrative. The department CX was established at APG only recently. The interest of the customer has always been our priority, but internally we sometimes had a different interpretation of that interest. Now, our standard starting point is: we shouldn’t come up with ideas ourselves on what the participant wants and finds important, we have to ask him or her. This department was established from that starting point. In a world in which customers don’t really have a choice, the entire organization still has the intrinsic drive to place the customer at the heart of everything we do.”
Our standard starting point is: we shouldn’t come up with ideas ourselves on what the participant wants and finds important, we have to ask him or her
How do you check what the customer wants?
“We ask customers to provide feedback in all kinds of different ways, to help us continually improve our services. By means of questionnaires, for example, we send those out quite often. We have steady consultative groups for some of the funds and these groups commit to us for a longer period of time. Whenever we come up with something new, we present the idea to the members. We also conduct interviews by telephone, during which we ask people questions about a certain topic. How do you experience this, how did that go, what can be improved? And people are also sent a text sometimes. We then ask: is this text clear to you or does it raise questions? The one form is a better fit sometimes than the other. That’s why we don’t use only one method. It can be quite suspenseful to ask customers to provide feedback, but they are very willing to participate. That’s really cool.”
What do customers specifically notice in terms of your work?
“I actually hope that customers don’t notice my work too much. We have done a good job when everything they were looking to arrange or asked went smoothly, if they didn’t encounter any problems and look back on that experience with a positive feeling. Ultimately, all teams within APG are the ones achieving this. I am just a link in the whole to get the process started.”
What do you do to relax?
“I usually enjoy visiting a museum or going out for dinner, but that is nearly non-existent right now due to corona. However, it is still possible to go for a walk and I just love watching Netflix. I really watch everything I possible can because I am very curious to see how other people look at the world. I can sometimes also profoundly disagree, but it is still educational.”
If we would call your colleagues, what would they say about you?
“Teammates recently referred to me as creative. I also hear quite often that I am cheerful and that my mood gives other people energy. I try to see and to track everyone. I am also an optimist, have plenty of hope and a good spirit. I enjoy every step forward. Everything is better than moving backward or coming to a standstill. Doing things a bit better every day, that’s what I derive my daily dose of energy from.”
What should customers be able to expect from you in the future?
“That we continue to fight to have their voices heard in all decisions that are made, small and large.”
Work until the age of 67 and then enjoy your retirement. Or could it be otherwise? A search for Plan P: innovative ideas and alternative scenarios to design your life, work and pension. A shift in the way we think for and by the young and the old.
Demographer Patrick Deboosere advocates for bringing down the pension age to 60 years old. “We grow older but are not getting healthier and fitter.”
Patrick Deboosere is 68 years old, but he is in no way thinking about retiring yet. He still is with heart and soul devoted to his position of demographer at the Free University of Brussels. “There lies my passion.” In the beginning of this year, the Belgian professor published his latest book: Lang leve de vergrijzing (Long live the ageing society, ed.). The growing number of older people is often presented as a problem, leading to an acute staffing deficit, higher pension costs and increasing healthcare costs. Deboosere prefers to turn this around, he considers ageing to be an achievement. “Isn’t it great that more people reach an older age than in the past? The social inequality is also reduced: thanks to better distributed prosperity, everybody is able to grow older.”
Older, but not fitter
The tragedy, however, is that people are less able to enjoy the years gained because they have to work longer. In the Netherlands, the age for receiving a state pension rises to 66 and four months in 2020 and 2021, and in Belgium to the age of 67 in 2030. Deboosere advocates to lower the pension age to 60 years old. We grow older, but are not healthier and fitter, says Deboosere. Old age still comes with ailments. “After a lifetime of working hard, people should be able to retire when they are physically and mentally ready.” But surely our society is unable to afford those higher pension costs? That is a myth, according to Deboosere, who is happy to take down some more of those myths in both his book and during the conversation.
Myth 1: Our lifespan rises
Babies who are born today should reach an age of over one hundred years old. The demography shows differently, says Deboosere. “The lifespan of a human being is determined biologically-genetically. French Jeanne Calment reached the age of 122 and that record has not been broken in 23 years’ time. Our lifespan is therefore limited: the same as we won’t be able to run one hundred meters in five seconds.”
The human species is therefore not living longer, but we do have more older people. The collective life expectancy has risen: boys will live to an average age of 81 and girls to an age of 86. It was in particular the decrease of child mortality during the twentieth century that greatly contributed to the life expectancy. In the past decades we were also able to prevent premature death more often among adults and older people due to improved nutrition, healthcare, working conditions and, for example, road safety. Deboosere: “But it is becoming increasingly more difficult to realize progression as the greatest gain has meanwhile been booked.” This means the life expectancy will not become much higher than this. So, we don’t have to worry about a high number of people well over the age of 100 who have to be paid from the same pension pot.
Myth 2: We have to work longer in order to bear the pension costs
That is not the case, says Deboosere. Admittedly, more people grow older but that can be compensated by means of our exponential economic growth. “We are getting more productive every year: we produce more with less labor. Robotics will increase that economic growth and, with that, the prosperity even more: in the seventies of the past century we had eighty cars per thousand inhabitants in Belgium, now we have 535. That number can be doubled in 35 years: one thousand cars per one thousand inhabitants. But is that what we want? We are dealing with a climate crisis and we are ready for a revaluation of leisure time.” It would be better for us to convert that economic growth into more sustainable production and consumption and into financing more leisure time, argues Deboosere. “In the past, people had to work until they dropped. Now that countries such as the Netherlands and Belgium are rich and developed, we, as civilians, should also become richer in time. But what do we do? We increase the pension age. Isn’t that peculiar?”
If people would be able to stop working at the age of sixty years old, the economy could actually get an extra boost because those people in their sixties will spend their money freely
Myth 3: Pensioners spend their time lazing and they all stay in Spain during the winter
Incorrect, according to Deboosere. “Pensioners often watch the grandchildren, take care of their own parents aged eighty years and older or work as volunteers. If that is no longer possible because they have to work longer, it only burdens society with higher costs.”
And there are more hidden social costs related to working longer, he warns. “If people are no longer able to persevere, they end up in the WIA (benefit for work and income according to capacity for work) scheme (former WAO) or they stop work prematurely without proper pension plan, resulting in a risk of poverty and having to apply for welfare.”
Myth 4: The pension pot is a bottomless pit
That is also not true, says Deboosere. If people would be able to stop working at the age of sixty years old, the economy could actually get an extra boost because those people in their sixties will spend their money freely. “That behavior ensures income for the baker, the hairdresser or the dentist. That collective capital generates much more return than the assets of the 1 percent super-rich who transfer their money to tax havens and not bring it back into the economy.”
If a higher tax burden would be applied to wealthy individuals and companies, the government can use those taxes to help finance the lower pension age, will pension funds be released sooner and therefore creates an economic driving force because of the increasing spending.
Myth 5: The pension age is the same for everyone
It is much easier for scientists such as himself, judges and artists to work longer, says Deboosere. But people with physical jobs, such as road workers, cleaning staff or factory employees are often physically drained after forty years work or more. Those people should be able to retire at the age of sixty. For people who want to continue work longer but are looking to slow down a bit, run-out jobs should be created, Deboosere suggests: work part-time, while retaining their pension accrual. “Don’t force everyone to descend the same summit but install several slopes.” However, the most important change shouldn’t take place in the pension system but in the way we think about prosperity versus well-being, Deboosere concludes: “The human being should become our starting point again.”
Customer satisfaction is increasing and feedback from members and employers is cautiously becoming more positive: the result of two years of hard work on increasing customer focus. Rob Schormans, board member of the Members and Employers Services, is giving us an update on the progress to date.
At the beginning of this year, even before the outbreak of the corona crisis, Rob Schormans and his team spent a day at the Efteling amusement park. Not so much for a ride in the Python or the Flying Dutchman (or maybe just a bit), but to gain inspiration: how does the fantasy-themed amusement park interact with its customers and what can APG learn from it? The working visit is part of the shift towards customer focus, which Members and Employers Services have been making for the last two years, in anticipation of the new pension system. The basic principle: empathizing with all pension-related moments in the lives of members and fully supporting them in this with maximum appreciation. That is not a matter of simply flipping a switch. Implementing all changes takes time, emphasizes Schormans, who is responsible for Marketing Operations within Members and Employers Services management. Still, the first results of the new approach are now starting to emerge and they are positive.
How was the customer served before: what changes did you have to make?
“APG’s main focus used to be on administering the pension benefits to the best of its ability. We lacked focus on people and the organizations behind that pension. Anyone who was new to the pension fund, became incapacitated for work or had lost a loved one, received a business-like letter with complicated terms such as ‘value transfer’, sometimes from several departments in a single week. Those letters didn’t do justice to the emotional side of important life events. Besides, people often found it difficult to understand what was in the letter.”
So that needed to change. How did you go about that?
“The emphasis had to shift to the needs of members and employers. We therefore adopted an agile working style to provide them with a faster service. We’ve also started working in multidisciplinary teams, not just pension specialists, but also IT people and marketers, for example. Together, you gain a quicker understanding of what members and employers need. We’ve mapped out fourteen important live events from a pension point of view, from memorable events such as a new job, marriage and birth to painful events such as divorce and death. We also examined the bottlenecks in our services, such as the complaints procedure and the payment of survivor’s pensions.”
What do customers notice of the changes in practical terms?
“When future members register with a fund, they now receive a friendly welcome card first. By doing this, you immediately set a warm tone. In addition, we try to write our letters as comprehensibly as possible and communicate more digitally. Nearly sixty percent of members indicate that they want to receive communication digitally. We’ll be testing these letters or mailings and our website in member’s panels: do people understand it? We also seek contact more often, which allows you to dose the information better and build up a relationship. For example, nowadays, we send people a card for their ‘retirement anniversary’, that’s the day they registered with their pension fund.”
We seek contact more often, which allows you to dose the information better and build a relationship
So you are working on improving communication. Does that also apply to the service provision itself?
“Certainly. Previously, people could only submit complaints in writing and had to wait weeks for an, again, written reply. Now, a complaint can be submitted digitally and you’ll be called back within 48 hours. Another example is survivor’s pension payments, which could take months sometimes. I recently spoke with an employer, a school principal. He told a poignant story: the partner of a deceased teacher was unable to pay for the funeral and the children’s school fees, because the survivor’s benefit took such a long time to come through. Fortunately, we’ve been able to considerably shorten that period. We’re also working on simpler procedures for submitting information and making payments.”
What has changed in the provision of services to employers?
“We no longer just look at scope, but now also focus on the difference in needs between organizations. Small employers want the pension administration to run smoothly and they want us to provide assistance to employees in practical terms. Large employers are more concerned with issues such as sustainable employability and managing sickness absence. We therefore support them through an information library, webinars and by training internal staff for specialist employee questions, such as early retirement. As part of our approach, we also work closely with the affiliated funds.”
What obstacles do you encounter in the shift to customer focus?
“Ideally, you would like to change everything at once, but you have to do it in small steps, because you’re also dealing with legal requirements, technical possibilities and a complex working environment. It also takes time to learn to see things through the eyes of the customer. We regularly listen to the Customer Contact Center, complaints handling and member’s panels. We also set up a ‘feedback loop’ recently. Feedback ambassadors collect customer feedback throughout the organization. We discuss this feedback on a weekly basis. Such as the surprise of a member who had subscribed to a digital newsletter, only to receive written confirmation in the mail. The feedback manager then contacts the teams or IT to see how we can implement improvements. We feed the result back to the colleague who introduced the improvement and, where possible, to the participant or employer.”
What have you learned from how other organizations deal with customers?
“We looked around at other financial companies, such as Achmea, ING and Nationale Nederlanden, as well as online companies such as Zalando and Bol.com and visited the Efteling amusement park. A visit to Tony Chocolonely was also on our list, until the corona crisis hit. At Zalando and Bol, for example, the track & trace option allows customers to see exactly where their parcel is. This teaches us that turnaround times must be as short as possible and that you must keep members and employers well informed. That day out in Efteling was also an educational experience. Staff at Efteling try to surprise their customers every day. They aren’t satisfied with a seven out of ten for customer satisfaction, they aim for a perfect ten.”
Can APG already see a shift in focus towards the customer being reflected in higher customer satisfaction?
“We measure that with the Net Promoter Score. You ask customers to what extent they would recommend your company to others. Two years ago, the NPS was negative, we had more critics than ambassadors among our members and employers. Since then, we can see a slight upward trend and even considerable pluses in the monthly scores. The feedback also becomes more positive. At the same time, people use the customer-friendliness of say Bol.com as a frame of reference, they expect the same from APG. The bar is therefore set higher and higher. Everything is pointing in the direction that we’re indeed making the desired shift towards the customer but as an organization, you need at least three to four years to complete it. You can compare it to a marathon. We’re halfway through, legs are feeling tired at times, but with focus, the right mindset and encouragements from the spectators, we’re determined to make it to the finish line.
After two years of research and preparation, the time has come: SPW, the pension fund for housing corporations is making six hard promises to its participants and employers today. It is a significant step for the pension sector. “SPW is really going out on a limb with these pension promises,” says APG executive board member Francine van Dierendonck.
Birte van Ouwerkerk and Jim Schuyt are the driving force behind the pension promises. Birte is responsible for the development and implementation of the pension promises as the Marketing communication strategist. Jim has been the chairman on behalf of the employers and the pension promises from day one.
Why are you making these promises to participants and employers?
Jim: “Promises are often made by commercial parties to get clients to commit to them. For example, Jumbo, where you can get your groceries for free if there are four people in line. We, as a pension fund, don’t feel that pressure. Because it is mandatory, participants can’t just switch to a different fund. That fact makes us see this as an extra responsibility. Even without being required to, participants should choose us; that is our approach. With the pension promises, we are therefore making the topic of pension and SPW’s services tangible and we are showing what the fund stands for.”
Do participants and employers really need such promises?
Birte: “Yes, we think so. These promises are based on extensive research among participants and employers. How are they seeing our services and the subject of pension in general? Although SPW scored positively on that first point, we also detected a lot of questions and uncertainties: will there be enough left for me and what can I expect from my pension fund? You can explain to them that those worries are largely unfounded. You can also put it in stronger terms by promising that the participants’ investments are in good hands.”
Making promises. But, with the new pension contract, isn’t that exactly what we are trying to get away from?
Jim: “With these six promises we are not going to do something completely new, or promise things we have never done before. The promises that participants and employers have chosen are showing things that we were already doing on a daily basis, but that they didn’t necessarily know much about. So, we are responding to questions that our participants and employers already had. These questions will not be that different when the new pension contract kicks in down the road.”
What was APG’s role?
Birte: “25 of our people were involved in the creation of the promises. From people working at the Client Contact Center (KCC) to the Employers’ services and Pension administration departments. These promises are also very valuable to APG, because they give APG employees more clarity about what is expected from them and provides a focus in the service.”
How will you make sure that these promises are really going to settle in the DNA of SPW?
Birte: “We are going to go live in controlled phases and will take a year and a half to fully integrate the promises into our services and communication. We will stay in touch with participants, employers and APG employees to see how it goes. We are now starting on the external branding campaign to inform employers and participants, with the objective of creating awareness during this phase.”
SPW’s six promises
1 Guaranteed income for the rest of your life, for you and your partner.
A guaranteed income for the rest of your life, but also for your partner and your kids if you die. Ensure income in case of disability.
2 Your investment is in good hands, with proven returns.
SPW achieved an average investment return of 7 percent for the past twenty years. Investments are transparent, responsible and socially conscious.
3 Room for you to choose what you want to do with your pension.
You choose when you want to retire, partially or completely. First a bigger amount and later a smaller amount. Partner’s pension or no partner’s pension.
4 Personal pension check, to use when you want to.
Online, by phone on chat. Use it when you want to. Because you want to know if you’re on the right track. Or because something changed in your life. Or because you want to apply for your pension.
5 Complete overview and insight into your future income.
Always and everywhere clear overview & insight at Mijn SPW (My SPW). All expenditures and income in a row. So that you know what you are doing now and how much money you need. And you can see what you want in the future and how much of a pension you will need at that time. You can choose and calculate for yourself in Helder Overzicht & Inzicht (Clear Overview & Insight), the calculation tool in Mijn SPW.
6 Pension plan for all of us, customized for housing corporations.
Developed in collaboration with all relevant representatives of employers and employees in the sector.
Yesterday, the European Commission issued a new action plan: "A capital markets union for people and businesses." A plan that is particularly important for pension funds and pension providers.
Capital markets in the European Union are still very national, which makes it difficult for savers and investors to invest everywhere. And it is not easy for companies to raise capital from all Member States. In addition, London, the largest financial center in Europe through which many European capitals flow, has ended up outside the EU due to Brexit. The Commission intends to do something about this. Because one real, well-functioning European capital market makes it much easier to finance companies for the economic recovery after the corona crisis. And this accelerates the green and digital transitions to a sustainable economy. In addition, a capital market union makes it safer and easier for citizens to invest and save for the long term. There is a nice factsheet about this on the website of the Commission.
The action plan consists of 16 actions, divided into measures to benefit SMEs, measures to help individual citizens, savers and investors and measures to achieve a single European market.
These actions will help pension funds with their investments in other Member States. Some proposals are particularly important for funds. These concern, for example, simplifying withholding tax refunds, better protection of investments against 'unreasonable' government action and improvements in the market for securitizations (the repackaging and reselling of loan packages, so that banks can take risks off their balance sheet, while other parties such as institutional investors will often like to have them). Some will still have to overcome significant political resistance, for example on insolvency law (action 11), where national views and traditions are very strong. However, it is also important for international investors that insolvency law functions properly, comprehensibly and quickly if an investment unexpectedly does not end well.
Action 9, which aims to help Member States to improve "pension adequacy" (the extent to which a pension is sufficient and corresponds to previous expectations) for their citizens, merits special attention. The Commission has noticed that Member States with funded supplementary pension schemes (such as ABP and bpfBouw) have better functioning capital markets. The institutions operating these funded pension schemes, also invest throughout the European Union. The Netherlands is such a member state, but only a minority of member states have funded pension schemes. In many other EU countries, pension adequacy falls short.
And that should change according to the Commission. In order to give European citizens better opportunities to save for their old age and at the same time promote European investment, the Commission wants to do three things:
- Develop a dashboard to track pension adequacy in the Member States.
- National pension tracking systems, so that as a citizen you can always and everywhere see what income you can expect for your old age.
- Investigate how auto-enrollment (automatic participation, usually with an opt-out) and other schemes can ensure that participation in occupational retirement provision is greatly increased.
It is remarkable that pension funds are suddenly under the heading “retail”, but it is actually also right if you put the perspective of the participant first. After all, it helps employees to take full advantage of the European capital market. The Commission is committed to improving understanding of Member States and citizens. This to increase the willingness to take action. She will then try to formulate good policy instruments, without offering them as compulsory uniformity. Hopefully, a dashboard and pension registers will greatly increase citizens' pension awareness. They can then look for individual forms of saving and investment themselves, but perhaps also as voters or employees ask for better supplementary collective schemes. The Commission explicitly preserves the powers of the Member States for the proper implementation of such collective schemes. Whether this should be achieved in individual Member States by pension funds, insurers or asset managers (and whether this should be collective or individual) remains open. But a better pension result is in any case high on the agenda of the Commission.
In the Netherlands, too, there are people with less access to pension, such as employees of companies that are not affiliated to a pension scheme ("blank spots") and self-employed persons. A good 'dashboard' for the Netherlands will also show that. Hopefully, the study that the Commission intends to conduct into auto-enrollment will also yield ideas that will help us in the Netherlands.
The fact that the Commission has chosen this direction does not come out of the blue. An expert group, set up by the Ministers of Finance of France, Germany and the Netherlands (link) - and of which Corien Wortmann (CEO of ABP) was a part - and a 'High Level Forum on CMU' (link), where Eloy Lindeijer (PGGM's chief investment management) was a member, both came with recommendations in the same direction. The European Commission is now following these two expert groups, who unanimously saw the importance of good funded pensions for the European capital markets union (and vice versa).
It would be nice if this also opened up a more positive way to talk about pensions and Europe. The Dutch pension fund sector is keen to be involved in the design of the capital markets union. We may be heard even better if we show that the pensions of all European citizens are important, and that we also think along with the Commission about this.
A View from Outside
We all know we should plan for “an income after retirement”. But that doesn’t mean we will do something about it today. Because we don’t feel like it, it’s too abstract, it’s too complicated. How can thinking about a pension become exciting? In the series A view from the outside, psychologists, behavioral scientists and marketers take a fresh look at the pitfalls, opportunities and challenges. This time: Lisa Brüggen, professor of financial services at the University of Maastricht and an expert in pension communication.
In Lisa Brüggen’s opinion, pension providers should be more aware of the fact that “pension” can mean something different for everyone. Everyone has a different picture of what the word pension means. “And it brings up different feelings for everyone too. One person knows exactly how much they have accrued and how much they will be getting when the time comes, and another person is wrongly pessimistic about their pension. Yet another is wrongly optimistic about what they will get every month after they retire. As a pension provider, you should really communicate differently with all those people.”
That is not happening now?
“You often see the pension provider thinking hard. What do we want to say? What do we want the client to do or not do? But they’re not thinking enough about the individual life circumstances of the client. For the participant, pension is not just one thing by itself; it is just a part of a much bigger financial picture. How much you have to pay for insurances, how much your mortgage is, whether you are able to save for the kids as well, or whether you’re temporarily making more money or less: it’s all connected. I’m not sure if it’s feasible, but it would be great if pension providers could map out that whole picture in an easily accessible way, in the future. So that people can always check and see how they are doing financially and how their future pensions fit into that picture.”
What would that look like?
“What I’d like to see is pension providers being able to analyze all the available financial data automatically and then offer a kind of periodic financial statement based on that. Free, accessible and reliable. It would give participants an overview of their financial plan and also provide insight into what they might want to change. More customized solutions and more focused on the personal situation. I think there is a great need for this.”
After years of research, Lisa Brüggen is convinced that communicating about pensions is custom work. Because how you deliver a message, what language you use, how you write the text, in what order you offer the information and who will receive the message: it all makes a difference. A Netspar survey this month revealed that when people are choosing options regarding their pensions, they are influenced by the way those options are presented. The order of the questions and pre-completed options can be used to “push” someone into a particular option, for example whether or not to opt for a temporary premium suspension. Lisa Brüggen feels these are exactly the type of insights that the pension sector should use more. “In the advertising and marketing world they’ve known for a long time that you can stimulate people’s behavior with a strategically designed message. Pension providers also know this, in theory. But they’re not making enough use of this.”
What should be done differently?
“They could be more focused and more strategic in their actions. It is important for communication goals to be formulated clearly and specifically, and that the communication methods are aligned with this. And then, you have to measure if the goal is being reached with those communication methods. How they are communicating with people about their pensions, using what medium, what message they are trying to get across and how that message is presented. Currently this is still being done more or less intuitively. It should all be more evidence-based.”
Can you give an example?
“If you want to motivate people to start thinking about their pensions or if you want to entice them to pick an option, how you present it will make all the difference. Research I was involved with in 2017 showed that even just the way a message is framed can make a big difference. In that research project, people were shown a text that was intended to motivate them to click on a link where they could find out more about their pension. For one group of respondents, the ‘investment frame’ was used, which primarily emphasized the profit to be gained by exploring their pensions now. For the other group, the ‘assurance frame’ was used, which primarily stressed what problems people could prevent by paying attention to their pensions now. People who got the ‘assurance frame’ clicked on the link nearly twice as much as the other one. This is an interesting outcome for pension providers that want to get their clients to take an interest in their pensions.”
How you deliver a massage and who the recipient actually is: it all makes a difference
Why do you think pension providers are making so little use of this?
“That dates back to the past. Twenty years ago, there was no need to communicate with consumers about their pensions. The interest rates were high, the pension system was solid, people often worked for the same employer for half of their lives. For pension providers there was no immediate need to enter into any dialogue with their clients. The nature of communication was mostly technical, financial and legal at that time. It didn’t require any communication specialists.”
But times have changed…
“Exactly. We are now dealing with low interest rates. People who change jobs much more often than before. And that has created much more uncertainty about the accrued pension. So, there is a much greater need to be able to communicate with participants in an effective and focused way about their pensions and their opportunities. Pension communication has become increasingly important. But in the corporate culture of pension providers, the financial side, unfortunately, still has more status than the communication side.”
How does that show up?
“Here’s a small example: if there are two speakers at an event and one of them is there to show insights about pension communication and the other one is there to speak about the financial side, the managers will go to the speaker that’s talking about finances. And at organizations, I’m seeing more and more that communications professionals are being consulted, but that their carefully thought-out strategies and advice are often superseded by impromptu plans. Plans that may sound good, but that have no scientific basis. Communication is still often seen as something that anyone can have an opinion about.”
Where are the opportunities?
“More focus on evidence-based communication strategies. Sharing more information within the sector. And more attention on what pensions mean in people’s lives. Within the bigger financial picture. In short: looking at pensions from the perspective of the people, instead of looking at people from the perspective of pensions.”
The corona crisis has hit the Dutch economy hard. Nevertheless, on ‘Prinsjesdag’ the cabinet announced that the purchasing power for pensioners will rise slightly next year. How is that possible? What do those numbers say? And what does it mean for pensions? Charles Kalshoven, senior strategist at APG, tells more about it in this video.
This whay Ali B, Boef and Ronnie Flex will also have money left over
“They all want to make a ‘mil’, a million.” Frank Barendse, manager of management consultancy SPEC and the business partner of Ali B, mentors hiphop heroes like Ronnie Flex and Boef. Yes, of course, they’re all going to let loose the minute the first ton comes in. But: “All rappers realize: it has to happen now. The trend is to invest in yourself as an entrepreneur.”
Frank Barendse (58) never switches “off”. As the business partner of the popular rapper and TV star Ali B, he built up management emporium SPEC from Almere. Hip hop heroes like Ronnie Flex and Boef, who serve an audience of millions, in the concert halls and on YouTube, are also part of it. They are more popular and richer than any other Dutch artists ever. And they make daily reports about this on Instagram and YouTube. Since 2008, SPEC has been managing the young artists and also tries to keep them on track financially in a world where expensive cars are the norm and the allure of drugs is never very far away. “Some of them have more or less guaranteed their financial future by earning a lot of money in a short time, so they no longer have any stress. That’s no secret. Boef, for example, signed a contract with Sony; a label deal for releasing three albums. For this alone, he gets an advance of 2.5 million Euros. That’s a tidy sum.”
Does that ever go wrong?
Frank Barendse: “Not for our artists. We have a big network with reliable, good people at the top of their profession, to assist them. But there are artists who make wrong investments or who rapidly spend or snort their money away. Najib Amhali, for example, was very open about this in his book. He blew a fortune.”
Frank Barendse opts for the business approach in his mentoring of the rappers, who sometimes become millionaires overnight. SPEC ensures that the artists stay focused and helps them to set up their own businesses to safeguard their future.
“These are mostly young people with a lot of money. We make sure that they stay ‘on top’ in their business as a well-known rapper or well-known artist. Then the money flow takes care of itself, either through music, or theater or TV. Those are the main things. But the minute the deal is made, and the money is in, our team of consultants ensure that the investments – if they make them – are done correctly. Of course, we may say to Boef or Ali: ‘Are you sure you want to spend 3 ton on buying a Bentley?’ You can say it six times, but they still do it anyway. But even then, we can still structure their expenditures in such a way that it doesn’t become a bottomless pit.”
We see it as our moral obligation not to let those people get derailed
Rappers often become multi-millionaires all of a sudden from scratch. What does that do to someone?
Frank Barendse: “Very often it is like: spend your money as quickly as you can on things that would make you and I think: do you really need that? Especially if you grew up in the streets and come from a less privileged family where you have to watch every penny, you feel like royalty when you suddenly get a ton of money. Some people immediately distribute it among family, friends and acquaintances. It is important to them to reward their social structure. Others completely let loose and all they want to do is party.”
Frank Barendse and his people then do what they can to help those young artists come back down to Earth. “Some artists are ‘one-day flies’. They have one hit, make a bunch of money, go through it in no time and you never hear about them again. Those ones are not with us, because we always ensure that there is a future, because the ‘shelf-life’ of a rapper is getting increasingly shorter. In the past, you’d be outranked after four years, but now you will disappear after four months if you don’t stay relevant. So, we ensure that that relevance is there. That also means: the video streams keep coming, they are visible on social media and there is a steady income stream. At a certain point, even the most notorious party animal gets tired of partying and, of course, we are always reminding them: what’s the strategy, what are we going to do next year, what about the year after that, how is your income doing?’ We try to teach them to look at their future intelligently. Not that we have to do it contractually or from a management position. We see it as a moral obligation not to let these people get derailed.”
Ali B is a role model for hiphop in the Netherlands, because he was the first wealthy rapper
Important here is the inspiring influence of Ali B, the “cuddly” Moroccan and a smart businessman who put hiphop on the map in the Netherlands and turned it into a lucrative earning model.
Frank Barendse: “He really became the role model for hip hop in the Netherlands, because Ali became the first wealthy rapper here. There were already some in America. They’re rolling in the money over there, because of the ‘scaled economy’. That is so big there: one hit and you don’t have to do anything else for the rest of your life. But it’s different in the Netherlands. Ali managed to build up a fortune by also doing theater and TV in addition to music. He handles that wisely, in part because his home situation is very stable, and he doesn’t squander his money. Except for that Bentley. That makes him a role model for Lil’ Kleine, Boef and many others, also because he has been at the top for so long.”
If you get five of those guys to talk about money and their future, what would be the common thread?
“They all want to make a ‘mil’, a million. The future is far way when you’re in your twenties. Boef is an exception; he invested in a beautiful house and owns a few other properties besides. The trend is not so much to invest in real estate, but more in yourself as an entrepreneur. Lil’ Kleine started a French fries business, Monica Geuze sells jewelry and they all want a clothing line. Ali has ‘Ik Wil Groeien’ (I Want to Grow), helping people with personal growth. And he has several other enterprises.”
While money was being invested in expensive cars, drugs and traveling in private jets a few years ago, the rapper in 2020 is opting for a business as an investment in the future.
“And there is always the awareness that music can stop. Corona has proven that. You can suddenly be no longer ‘hot’, suddenly have no more hits, no longer have the inspiration, or you’re overtaken by the ‘the next best thing’. That is much less the case for professional athletes. They tend to stay at a certain level for longer. The competition in hiphop - 2018 and 2019 were top years - is bizarre. There are so many good rappers. And all those rappers realize: it has to happen now. And because that awareness is there, they also look at: what else is there, besides my career? Look at what Lil’ Kleine has done with his French fries joint. Others started clothing brands. They are all looking for alternatives and they have the money. Those rappers also have an incredible digital reach. The online ‘presence’ of Monica Geuze or Ronnie Flex is close to a million or a million plus. They are their own marketing company. So, if they want to start a business, let’s say in glasses, and they post pictures of themselves on Instagram, wearing the glasses they produced, they will immediately have a million consumers who also want a pair of glasses like that.”
Also read: Athletes are going for real estate
Suppose you are between 60 and 70 years of age, and you only have a few years left before the mortgage on your house is fully paid off. Over the years, you have – almost imperceptibly – accrued quite a bit of capital, but it is largely invested: in your house and your pension fund. If you were able to convert that total capital into a monthly payment (if you retire at the age when you’re entitled to Old Age Pension), you would receive more than 70% of your last-earned salary. And you feel like you have accrued too much capital that you can’t do anything with. Early retirement is an option, but that is not very attractive: if you stop working five years early, for example, it decreases your pension by several dozen percent. And, of course, you can release your capital by taking out a second mortgage on your house, but then you will go into debt again with the accompanying obligations. So, the options are limited.
Helping your kids
Wouldn’t it be great if you could use a portion of that accrued pension to help your kids buy a house? Or to renovate your own house so that you can stay there even if you become less mobile? That way, with 10 to 20 percent of your total capital, you would get a lot more out of what you have been accruing all those years.
It is an important reason why I am in favor of “conditional freedom of choice based on your entire capital”. Currently, there are already requirements for withdrawing your pension, but they only look at the pension you have accrued. Those conditions (fortunately) protect the group of Dutch citizens that have not accrued much pension and don’t own their own home. An example of such a condition is the rule that someone’s pension cannot drop below 50 percent of the original level after using the freedom of choice (for example, early retirement or a temporarily lower or higher pension payment).
There is a downside to these “protective conditions”, however. They unnecessarily limit a relatively large group of people who have more capital in obtaining their preferences. After all, your total capital, not just your accrued pension, is relevant for your retirement. If the freedom of choice to withdraw your pension depends on that entire capital (including the available capital in your own home and investments), you have a more realistic basis from which to estimate if someone will benefit from protection or if flexibility is what is wanted and justified. For people with more capital there will then be more room to use a portion of their pension in an alternative way.
With conditional freedom of choice based on the total capital, the government helps citizens with a good distribution of their income over the entire lifespan and does not force them to inadvertently save too much. This would also benefit the government’s aim to keep people working longer.
Eduard Ponds is a Senior Strategist Research & Analytics at APG and endowed professor at the University of Tilburg
Today, the government is presenting the annual budget. Will the position of working and retired people in the Netherlands improve in 2021? Six questions about Prinsjesdag and pensions.
1. The government is talking about a 3.5 percent growth of the economy and a 1.2 percent increase of purchasing power for employed people and 0.4 percent increase for retirees. That sounds – moderately – positive. But how certain are those predictions?
It is a fact that the government is lowering taxes by 1 billion Euros to improve the purchasing power of Dutch citizens. Despite the fact that there is no indexing in 2021 for most retirees, on average their positions will improve slightly (by 0.4 percent). Employees who are keeping their current job in 2021 will also slightly improve on average (by 1.2 percent). This means that many employed people and retirees will have a little more money to spend next year.
At the same time, this requires some comments. In short: purchasing power pictures don’t mean that much, particularly right now. The purchasing power pictures are determined by the development of wages, inflation and government measures. The latter is the only thing the government can fully control. And now that the uncertainties around the development of the economy and the employment market are even bigger due to COVID-19, the predictions mean even less this year than they did in other years.
It is expected, however, that more employees will lose their jobs in 2021. They will be spending less, not more. This figure is not included in the purchasing power pictures. In addition, municipal charges, such as the real estate tax and parking rates may go up, because many municipalities are having financial problems. This has also not (yet) been incorporated into the purchasing power pictures but may have a big impact.
2. We are also hearing about a shrinking economy due to corona, higher premiums and price increases. How will that affect working people and retirees next year, in practical terms?
The purchasing power pictures always take into consideration higher wages, lower taxes, higher prices and slightly higher care premiums. If you add up all the plusses and minuses, most people will be slightly better off. But that is very uncertain. The local municipal taxes could rise (significantly).
3. What role does corona – and a possible second wave – play in this story and in the forecast of pensions in 2021?
If there is a second lockdown in the Netherlands, the Dutch economy will develop less favorably than predicted. That would postpone the economic recovery for some time. For the pensions in 2021, the coverage ratio of the end of December of 2020 will be key. Corona may have an impact on that, but faith in the financial markets is determined by several factors. For example, we saw very high share prices in August of 2020 despite the great uncertainty around corona in, for example, the US, Brazil and India.
4. Today, we also found out that some funds are still below the 90 percent coverage ratio. What could that mean for pensions in 2021? What scenarios are possible?
For pensions in 2021, the coverage ratio of the end of December of 2020 is determining. If the coverage ratio is still below 90 percent at that time, in many cases there will need to be a decrease of pensions. The funds will then still be able to opt for spreading this decrease over time. A decrease in pensions is not included in the purchasing power pictures.
5. Last week, a survey showed that the life expectancy of the Dutch person has been adjusted downwards. Will this have consequences for pensions?
The Actuarial Society has indeed lowered the average life expectancy. This is related primarily to a refining of the model used. The life expectancy has not suddenly declined. According to the Society, a 65-year-old now has half a year less than was expected previously. For a man, the life expectancy at age 65, for example, has changed from 20 ½ years to 20 years. Because pension payments will then have to be paid out for an average of half a year less, the coverage ratio rises by an average of 2 percent. It is important to mention here that the exact figures are different for each fund. The figures do not yet take the corona crisis into account.
6. But do the funds play a role in the recovery of the ailing economy resulting from corona?
Prinsjesdag this year is primarily about how we, as the Netherlands, can come out of the COVID-19 crisis in terms of investments. The government pre-empted this with a recent presentation by the Nationaal Groeifonds (National Growth Fund), which should boost public investment in the coming years. The Dutch pension sector understands and supports this movement towards active economic investment policy by the government. The Dutch pension sector would also like to increase its social role as pension investor in the Netherlands and elsewhere. For example, by pulling the Netherlands out of the crisis, in an accelerated and more sustainable way, based on public-private cooperation with the government
See link for a position paper by the Pension Federation, leading up to Prinsjesdag.
The pension contract will bring several significant changes with it for participants. The lump sum is one of them. This will allow you to withdraw 10 percent of your pension capital all at once as soon as you retire. How is that going to work? We asked the experts at APG.
1. Briefly: what is the lump sum?
It is a one-time payment. It is when you can withdraw a percentage of your accrued pension pot all at once. Every year you pay a premium and your employer also deposits money into your pension pot. After a number of years, a certain amount will have accrued and when you retire you will be able to withdraw a portion of that. It is expected that this will go into effect in 2022.
2. Why is the lump sum being introduced?
The pension plans already have various options, but being able to withdraw a lump sum is new to the Netherlands. In other countries this has been an option for some time. It allows people to better align their pension with their personal circumstances and needs. It is the government’s express wish to offer more flexibility so that you have more options for the first years of your retirement. For example, you may want to pay off your mortgage, or take a trip around the world at age 63 instead of working for a few more years.
3. Is the Netherlands happy with the lump sum?
A Netspar study, conducted by researchers of the Central Planning Bureau (CPB) and the University of Tilburg 2 years ago, showed that participants in pension funds want more options for their pension capital. It has to become easier to use a portion of the capital to, for example, buy a house or start working less, sooner.
4. So, basically it is a positive development?
It is great to get more freedom. But a lot depends on the conditions that are set for this. For many people, for example, retirement age is too far way. They want to retire sooner. Most people use the so-called retirement bridging for this; initially a bigger pension and later you can make do with a smaller pension because you’ll be getting the Old Age pension. In that case, you will not be able to get the one-time lump sum. The lump sum may also have tax implications for people with lower and medium incomes and lead to lower payments. You may therefore be wondering if the lump sum is only a good idea for the happy few. This is an issue regarding the rules as they are currently. It would be unfortunate if this opportunity for positive options is relegated to a dead letter. The upcoming discussion about this in the House of Representatives will be interesting. Incidentally, not all the conditions around the lump sum are negative. It is sensible, for example, that the maximum amount you can withdraw at once is 10 percent of the pension. This prevents the pot from emptying too fast. After all, you do want to be able to enjoy your retirement when you’re eighty-eight.
5. What should you watch for?
It sounds attractive, of course, to get 10 percent of your pension up front. And not worry about how much you’ll get later. But you need to stop and ask yourself how you envision that later part of your life. Will you have enough left for your regular expenses? Another condition for the lump sum is therefore that it must not bring the remainder of your pension below a certain limit. This is about 500 Euros a year. Taking up the lump sum should not result in your having to live on a pension of 350 or 465 Euros a year. So, if your pension capital is small, you may not be able to get the 10 percent lump sum.
With cooperation of Wilfried Mulder, senior policy manager at APG, and Debbie Kwanten, senior pension lawyer at APG.
You can find more information about the Netspar study by the CPB and the University of Tilburg here.
Who are the people answering your telephone call when you have a question about pensions? And who are the people ensuring that you receive your pension statement every year? What are the underlying factors in making sure there is enough money later on for your pension payment? We take you with us to have a look behind the scenes.
Stefan Ochse manages the customer contact center (CCC) at APG.
What is it that you do exactly, as the head of the CCC?
“I am responsible for the customer contact center, where I manage about 100 contact specialists. Nowhere else the voice of the customer is heard as expressly as at our department. My main task is streamlining that process. In addition, I make sure all of us know what we are working towards. One of our objectives is for customers to appreciate us to such an extent that, should it ever be possible for people to choose their own pension fund, they would still choose us because we provide good service.”
How did you end up in this job?
“After I finished my law study, I became an agent at the CCC in 2014. I would have liked to find work more associated with my study but that was very difficult at that time. APG seemed to be a great employer. And after I got promoted a few times, I ended up where I am right now.”
What do customers notice in terms of your work?
“I believe that, thanks to the way we manage our department, our people do whatever they can to help our customers. If we do a good job, the customer really feels supported by us. That means we are of added value at important moments in his or her life.”
What are the questions most frequently asked?
“Customers mainly contact us when their retirement age is approaching and their pension has to be applied for. Questions such as ‘How much pension will I receive?’ or ‘What would be the consequences for my pension should I retire early?’ are very much the order of the day. But we also receive plenty of questions on life events, like getting married, relocation or changing jobs. After all, it is all about the income now, later on and in the future. That has to be arranged properly.”
What type of things do you encounter most often during customer contacts?
“Unfortunately, we are still noticing matters that are not running as smoothly as they should, meaning customers have to contact us unnecessarily. Think about deadlines that are expiring or letters that are not clear enough. We are happy to see other departments contacting us increasingly more often to, for example, show us a preview of the letters that were drawn up. We also stimulate our employees to share the feedback they receive from customers with the rest of the organization. This enables all of us to improve our work a bit more, over and over again.”
Eventually you want the customer to feel truly understood and helped
What is the biggest challenge in your work?
“To determine the direction customer contact is going, in a general sense but also specifically within APG. The near future will provide us with, for example, voice bots and computerized support. But customer contact continues to be about human actions. It will never be fully automated. We are investigating how we are able to predict the need of the customer even better based on the technology, algorithms and data. His of her voice has to be become increasingly leading within the organization. We are thinking about a future in which we are not waiting for customers to call us, but in which we approach them proactively in order to provide support. For example, if we see that they visited the digital pension environment and still have questions. That still feels a bit scary, it is far-reaching. But I am sure we will find a way that is fitting for the need of the customer. I can certainly see a future for this concept. To ensure that customer contact does not continue to be the old-fashioned demand-supply, but that we evolve along with the needs of the outside world.”
What should the customer be able to expect from you in the future in concrete terms?
“We are obtaining more and more insight into the needs of our customers. We want to adjust our service provision accordingly. Next year, we will try to introduce a new way of linking inbound calls to our employees. That way, we can link the most empathic employees to the calls that mainly require relieving customers of their concerns. The same applies to employees with the most substantive knowledge: they can be perfectly matched with conversations during which substantive questions are more likely to be asked. Eventually you want the customer to feel truly understood and helped. And I believe this development is essential in order to achieve this goal.”
APG will position a team of platform developers independently. The team, with ten employees, will continue under the name Hyfen. Hyfen is a spin-off from APG in wich the Belgian IT provider The Glue has acquired a majority share. APG remains involved as a shareholder and client.
In recent years, Hyfen has built a platform to connect administrations of parties in the pension sector. Previously complex and cross-business processes can be organized more efficiently and more customer-friendly with the help of the platform.
Hidde Terpoorten, director of Hyfen: “The first product we’re launching is Mijnwaardeoverdracht.nl. Currently, the platform is being connected and taken into use with the first customers. Later this year the public go-live will follow in cooperation with the Dutch pension sector. Arranging a pension value transfer is a complicated and time-consuming affair for participants. This will change with the solution developed by Hyfen. By cooperating with four large pension providers, it will soon be possible to arrange a value transfer for members online simply and quickly.”
Gerard van Olphen, Chairman of the Executive Board of the APG Group: “By positioning Hyfen remotely, our pension fund clients and their participants continue to benefit from the knowledge and skills of these professionals - while at the same time giving other pension funds and participants access to their innovative services. I am convinced that Hidde and his team will be successful and look forward to further cooperation with pleasure and confidence.”
In addition to APG as shareholder and customer, the Belgian full-service IT provider The Glue joined the spin-off as a majority shareholder. The Glue is part of a big FinTech ecosystem and has extensive project and IT experience in the financial sector.
The Glue CEO Paul Grimbers: “Much remains to be done on the European playing field of pension service providers. By joining forces and focusing on the creation of platforms with innovative data exchange, we want to deliver added value in this domain.”
With the new set-up, Hyfen will be given the space to provide independent services to the pension sector and its participants and to use the accumulated knowledge for other processes within and outside the pension sector. Future possibilities are explored together with the consortium.
The Ombudsman Pensions was established 25 years ago. What kind of issues does this mediator address? Henriëtte de Lange, the current Ombudsman Pensions, on complaints of pensioners and employees, and what you should do if you cannot solve the problem with your pension fund.
Most people have arranged their pension well. At least, that’s what they think. Things still go wrong sometimes. You are paid a lower pension than expected. Your pension accrual is stalled, without your knowledge, because you suddenly cannot work anymore after you had an accident. Or the partner is unexpectedly not entitled to survivor’s pension as a cohabitation contract was never signed. Those issues are nasty and have major consequences. According to the rules, the pension fund is often right by law in these types of cases, but the employee or the pensioner was not or insufficiently informed. In that case it is possible to file a complaint. And what if that comes to nothing? You can contact the Ombudsman Pensions, free of charge. He or she will then - if possible - mediate, look for a solution and try to bring both parties closer together.
Age with dignity
That Ombudsman is Henriëtte de Lange. A passionate pension lawyer who has been working in the pension industry for 25 years with great satisfaction. Her office is in The Hague, in the SER building. Her guiding principle is the statement she once heard during a congress on pensions: “A pension contributes to aging with dignity.” She adds: “You maintain control of your own life when you have a good pension. Even if you are no longer able to work.”
In her own words, De Lange is genetically affected with her enormous interest in pensions. Her father used to be a professor in Pension Law, and as a child she was already taught the importance of pension. “A long time ago, the church took care of you, or your children. These days, you are the one responsible for becoming self-sufficient in your old age.”
Informing employees on time
Many employees show little interest in their future pension. That’s something ‘to think about later on’. Most people only give some thought to their pension when it is almost time to retire. De Lange: “That has always been incomprehensible to me. Everyone gets nervous when the price of petrol increases with three cents, but people rarely have any idea about their monthly contribution to their pension payment, the amount they accrue for later. They are just not thinking about it.” She believes pension funds and insurers should inform their participants better. The same applies to employers: “Employers could, for example, provide an explanation during important moments in their employee’s lives. As soon as they start living together or get a divorce, are fired from work, fall ill for a longer period of time or become incapacitated for work, just to name a few. These are all events that may have an impact on your pension payment. Those employees should be made aware of it in a timely manner. But that happens all too infrequently in my opinion.”
Top 3 of complaints
The Ombudsman Pensions receives more than 900 pension complaints on an annual basis. De Lange handles about 20 percent of those complaints, the rest of the complainants appear to be helped with a proper explanation or first have to go through the complaints procedure at their fund or insurer. If that does not result in a solution, they can still turn to the Ombudsman Pensions. What is the subject De Lange receives most complaints about? She lists her top 3: “Uncertainty about the pension amount, about the partner pension and about pension accrual in case of incapacity for work.”
Still, after 25 years, the Ombudsman Pensions is not known to many people. Could that be because there were no complaints? Or because the problems were already solved by the pension fund or the provider? “No, I wished that was true”, De Lange says distinctly. “The pension funds, insurers and providers should improve in explaining to their participants the way in which their complaints procedure works. And the time at which someone is able to turn to the Ombudsman Pensions for help. That still happens all too infrequently. I gave an interview to the magazine Plus recently. Immediately thereafter, I received several responses from readers. Nobody listened to their pension complaint; they ensured me they ‘unfortunately never heard of an Ombudsman Pensions’. Otherwise they would have come to me.”
De Lange has the possibility to publish her advice if a pension fund or insurer was wrong in her opinion and did not take any action. Apparently that works as she never had to do this: “There is not a single party in the pension industry who likes to attract such publicity.” Also new is that she is the first Ombudsman able to investigate.
Legally correct, but poor communication
How is De Lange fulfilling her role as Ombudsman Pensions? “I am not purely here for the employee or the pensioner, but I am trying to help parties find a reasonable solution. This means I am not an advocate, but I am looking at individual complaints as an independent mediator. I am also trying to indicate to the industry what they should improve. A pension fund often is legally right but didn’t act clearly or reasonably. Or they failed in their communication towards the participant. I will then ask if it is possible to meet the complainant halfway. With a gesture or financial assistance. Some pension funds stick to their views and argue: you are not entitled to anything if it is not included in our regulations. But some other pension funds actually listen to De Lange: “The latter pay a damage amount even though they were legally correct, but admit they communicated awkwardly.”
- Complaints about the execution
The reason to establish the Ombudsman Pensions in 1995, was a green paper of the European Commission. That green paper elaborated on the way in which consumers’ disputes, also with regard to pensions, could be solved better. This led to the birth of an Ombudsman Pensions in some countries: an independent party handling complaints and disputes about the execution of pension regulations. The Ombudsman Pensions does not handle complaints about the contents of a pension regulation but only examines the execution of that regulation.
“The pension system was hard to maintain the way we have been doing it, with a zero interest rate. The system is simply not set up for that,” says Onno Steenbeek, Managing Director of Strategic Portfolio Advice at APG and professor at the Erasmus University of Rotterdam. In a new podcast with Jort Kelder he talks about the upcoming pension contract.
In the AXA IM Bootcamp podcast, broadcasted on September 1, 2020 Kelder asks several experts about the new pension contract. Besides Onno Steenbeek, Cees Harm van de Berg (Director of Investment at Willis Towers Watson) and Chris Iggo (Chief Investment Officer at AXA IM) were also asked to share their expertise.
“I noticed that Wouter Koolmees (Minister of Social affairs and Employment Opportunities, ed.) mentions that pensions may go up more often than that pensions may go down,” Jort Kelder comments in the first ten minutes of the podcast. Onno Steenbeek: “Realistically, that will probably be the case: it will go up more often than it will go down. But if you’re being honest, even in the last few years, pensions only went down substantially with a few pension funds. That is because pension funds were able to shelve the pain for later. It is not true that we are changing to a “casino pension” and that pensions will therefore be reduced. Many pension funds are in bad shape and that reduction will have to be incorporated into the new pensions. But this is true: We are now going into a system in which more of the risks are being put onto the participant.”
During the discussion, one of the things Onno commented on was the link between the contract and possible discounts. “If there is a pension discount in the future, it will be associated with the new pension contract. These discounts would have also come without this new agreement; they are inevitable. But there is a chance that this could be a false start for the new pension contract.”
Onno states that processing the new contract in the administration systems is a big job for pension administrators. But after that, the administration will become much easier: “Military operations are being set up at the administrative agency to get everything ready for that new reality. We would do well to stick to that period of 5 ½ years” (all pension funds must have switched over to the new system by January 1, 2026 ed.).
With these changes, can the Dutch pension system be considered one of the three best systems in the world? Onno: “Other countries are declaring us insane for making any changes at all. But the system was hard to maintain in the way we have been doing it, with a zero interest rate. The system is simply not set up for that.”
Asked about the pros and cons of the new pension contract: “We have entered into several agreements in politics in the past ten years, but ultimately it all turned out to be a bit vague. This new contract is more concrete, but it is just a speck on the horizon. What we need to talk about now is the transition to this new system, because there are a lot of questions that have not been answered yet.”
You can watch the recording of the AXA IM Bootcamp here.
You are entitled to part of your ex-partner’s pension after divorce. On January 1, 2022, the new Dutch law on pension distribution after divorce will enter into force. So, what’s going to change? Plus: Five golden pension tips for when your marriage ends.
A new law on the effects of divorce on pensions is currently in the pipeline in the Netherlands. The main change we expect to see is that the ex-partner will automatically receive half of their former spouse’s pension built up during the marriage. But an ex is entitled to half even under current legislation, unless you have come to a different arrangement.
Working it out
Harrie Alberti, a paralegal at APG, broadly sums up the current rules for us. “If partners separate, the pension of the participant – the person who accrues the pension – is distributed. The ex-partner is entitled to half of the pension of the participant who accrued the pension during the marriage. Any retirement pension accrued before and after the marriage is not distributed.”
Let’s look at a simple sample calculation:
- A participant’s total pension is worth €20,000.
- €15,000 of this was accrued during the marriage.
- The ex-partner will receive half of €15,000 = €7,500.
- The participant will receive €7,500 + €5,000 = €12,500.
The ex-partners may have the distribution carried out by the pension fund, as long as they apply for it within two years of the divorce, Harrie explains. “They can also agree not to share the pension or to come to some other arrangement.”
As for a partner’s pension, “If the person who accrued the pension dies, their ex-partner is entitled to a partner’s pension that was accrued up to the divorce. This part of the accrued partner’s pension is no longer payable to any new partner.”
New law takes effect in 2022
The new law will enter into force on January 1, 2022. Harrie sets out the most important changes.
- Pensions accrued during marriage are now automatically distributed. No action is required from the ex-partners from now on.
- After the distribution, the ex-partner of the person who accrued the pension is entitled to a pension of their own. They can then decide when the pension starts. This marks a change from the current situation. As things stand, the participant decides when their pension starts and the ex-partner then receives a part of that retirement pension.
- Only the part of the retirement pension and the partner’s pension accrued during the marriage will be distributed. At present, this applies only to the retirement pension. The partner’s pension accrued up to the end of the marriage is now entirely payable to the former partner.
Learn more about these changes (in Dutch):
While ex-partners often recognize the importance of reaching a settlement, pensions are often overlooked in a divorce, explains mediator and divorce financial adviser Corrien Roche, owner of Roche divorcel advisers. “Many mediators and lawyers find it too complicated, so it is hardly ever discussed, if at all. But there can be a lot of money at stake. Aside from the house, your pension can be your largest asset.”
The VPS Act, which governs the settlement of pension rights in the event of divorce, stipulates that the retirement pension accrued during marriage must be distributed 50/50 by default in the event of divorce. But it doesn’t necessarily have to be that way, Corrien says. “Most people choose this route often because it’s easier or they don’t know what their options are. But you can instead leave your entire pension to the person who has accrued the least amount in their pension, or apply a settlement percentage to someone else’s pension.”
Moreover, if there is a large age gap between the two partners, this requires a different approach, says pension consultant Eric de Bruijn of edb.pensioen.nl. “If one partner is considerably older than the other, the oldest of the two must hand over part of their pension on their retirement date and wait to receive their part from their former partner. There are some smart solutions for this.”
Eric continues, “The law offers the opportunity to deviate from the standard. So, take advantage of it! The value must be calculated correctly and objectively, which requires a custom approach. That doesn’t mean there is an ideal solution for every situation. But lawyers and advisors are there to help you.”
Spoiled for choice
In Eric’s experience, cooperation between the spouses routinely leads to a solution that both sides are happy with. “You’re spoiled for choice. Sometimes, the two ex-partners can keep giving each other a share of their pension until they are practically the same in value. But this requires careful guidance. The ex-partner may continue to live in the house in exchange for waiving any entitlement to the other’s pension, for example. Arrangements like that also affect your tax.”
It is important to check whether the pension administration wants to cooperate, he advises. “You might well be allowed to come to another arrangement, but not every provider is flexible.”
Emotions run high
Emotions are part and parcel of a divorce. People must remember that they need to make the right decisions for their future. Corrien knows that the idea of in-depth discussions on finance and/or pensions isn’t the first thing on everyone’s mind at that stage of their life. “Yet, people are well aware that they are making an important decision for their future. They prefer to be guided step by step, so that they can make the right choices together.”
Five golden pension tips for when your marriage ends
- You can agree on how your pension will be distributed long before you retire in a divorce agreement.
- If your pension provider is informed of what you have agreed on within two years of the divorce, the fund will automatically distribute the pension.
- Conversion can be an attractive option. This means your pension distribution rights will be completely separate from your ex-partner’s in the event of divorce. You will then not be dependent on the age at which your ex-partner retires.
- Not every situation is the same. Choose a lawyer or advisor for a solution that is right for you.
- Before considering any changes, check whether your pension administrator will cooperate with any tailored arrangements.
Blikken van Buiten (Looking in from the Outside)
We all know we should make sure we have “an income for later”. But that doesn’t mean we will do something about it today. Because we might not feel like it, it’s too abstract, too complicated. How can we make the idea of a future pension exciting? In the series “Blikken van Buiten” (Looking in from the Outside), psychologists, behavioral scientists and marketers take a fresh look at the pitfalls, opportunities and challenges.
Episode 1: Professor of Behavioral Change and Society at the Radboud University, Rick van Baaren.
Behavioral scientists Rick van Baaren about the senselessness of “sensible messages”
If there’s one thing that Professor of Behavioral Change and Society, Rick van Baaren knows for sure, it is that people are rarely convinced by rational arguments. And they certainly do not inspire action. His advice to pension providers is therefore short and to the point: “Stop using rational arguments when reaching out to people.”
“What I often see pension providers do is to send very clear and sensible messages that basically boil down to: Attention people: your pension is important. In the hope that people will think: ‘Right, it’s true: my pension is important. I’m going to find out more about it right now.’ But it doesn’t work that way.”
“You’re not telling them anything new. People already know that having a retirement plan in place is important. And they know they should look into it more. Just like they know that smoking and eating junk food are not good for you. But just knowing it doesn’t mean you will act accordingly. The pension provider’s strategy is still often: if we impress upon people that setting up a pension plan is important often enough, sooner or later the penny will drop. But this is not the case. At most you’re telling people something they already agree with. That doesn’t make them take action. And that’s the problem with many SIRE campaigns too.”
“Most people don’t want to worry about the future”
Those are doing quite well, aren’t they?
“Yes, they appeal to many people. Because they are often saying something that we all agree with already. For example, if you say: it’s wrong to attack emergency workers, many people who never attack emergency workers will think: ‘Yes, obviously!’ But a campaign like that will not ensure that people who, in certain situations would attack an ambulance will suddenly, in the heat of the moment, think: ‘Oh no, it’s wrong to attack emergency workers. I’d better not do it’.”
So, what does work?
“It starts with doing your homework. If you want to change people’s behavior – and that is what pensions providers want to do – a thorough analysis must be conducted first. Summarized, this means: what is the target behavior? What is the problem behavior? And then you have to look at: where is that problem behavior coming from? What is perpetuating it? What are the resistances that prevent people from showing the target behavior? Only when you know what those resistances are can you try to eliminate them. And when it comes to pension plans, unfortunately, there are many.”
“The subject of retirement means ‘later’ for many pe