A translation of this article follows.
Navigate quickly through this series:
Bankrupt off the field
'Mandatory pension accrual works like a red rag on the self-employed'
The City, Growth, and the Virus
The reason why the Dutch pension system is the best in the world
This is the opinion of people over 55 about the new pension system
New pension app wins prizes
“Pension sector joins hands to simplify value transfers”
What the American elections (could) mean for our retirement
Pieter Hilhorst: 'We have to make much better use of the hidden power of vital elderly'
ABP tops Dutch pension fund sustainability ranking for the third year in a row
Employers, put the pension plan at the front in the window
“Having no pension scheme is a no-go on the labor market”
Professional cyclists and pension: 'Most of them don't earn buckets of money'
‘We fight for the voice of the customer’
“Earlier retirement enriches us: in terms of leisure time”
“Now, we first send new members a welcome card”
SPW is making 6 “hard promises” to participants and employers
European capital markets union is good for pensions in the EU
"Pension funds must provide participants with a much more customized service"
Purchasing power will increase next year. What does this mean for pensioners?
"Of course, I say to Ali B: Are you sure you want to buy a Bentley?"
‘Give people with more capital more freedom in pension withdrawal’
Prinsjesdag: More or less to spend in 2021?
10 percent of your pension in your bank account? 5 questions about the new lump sum plan
“People mostly ask us: is it possible for me to retire early?”
Developers of new pension platform APG will continue independently
Complaint about pension? Contact the Ombudsman
“Realistically, our pensions will probably go up more than they will go down”
What does divorce mean for your pension?
"People know already that retirement is important"
"I know very little about it"
"Many young employees are disappointed with the pension contribution"
Parental leave now, less pension in the future?
Pension Talk - News update week 31
The lumpsum: 10 percent pension at once, withdraw or save?
"Who doesn't want to predict the future?"
How do you build up a pension as a self-employed person?
Annual report APG 2019: Looking back on a financially strong year
The quality of pension administration needs to go from Premier League to Champions League
Guest Column: Japke-D Bouma about cut out the jargon in pension world
Gerard van Olphen warns for ‘horror scenario’ in FD
"Pension fund can turn to APG again"
More attention for pensions in investigative journalism
“Communication is not the solution if you don’t offer meaningful choices”
PWRI, ABP and APG win Pension Pro Awards 2019
Ronald Wuijster in FT: “People assume there are no savings left”
"UPDATE" Agreement in principle on pension system
Agreement in principle on pension system: 'a good first step'
APG brings pensions closer
“Pension shouldn’t become a second Brexit ”
A European Track & Trace Pension Platform
Interview Gerard van Olphen in Telegraaf
Launch 'The world behind your financial future'
Annual report APG 2017: good steps taken in increasing pension value for participant
Eight questions and answers about pensions and interest
The retirement puzzle of self
Netherlands maintains second place world ranking pensions
The times they are a-Changin
Pension system 2025: ready for the next sequence in the 21st century?
Sixth APG Summer Course organized for customers
In the psyche of the pension participant for better pension communications
Change mandatory bogged down in renovation pension
Review The Future of Pension Management
On low interest rates, pension and ambition Gerard Olphen
In discussion of the Dutch pension system
Chairman ABP guest at Buitenhof
Most participants will lump sum of over 10% at retirement
Retirement is good for health
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 people and therefore ‘far away’. Plus, it is something abstract, it is difficult, and for many people it is lacking urgency. On top of that, there is the phenomenon of ‘optimistic bias’; in other words, people overestimate the chance of positive events and underestimate the chance of negative events happening to themselves. This allows people not to worry about the future. Altogether, that’s quite a few resistances. You might say: when it comes to behavioral change, the pension sector has pretty much everything going against it.”
“When it comes to behavioral change, the pension sector has pretty much everything going against it”
So, now what?
“This does not mean you can’t eliminate those resistances. But pension providers really need to examine their target groups – even better than they are undoubtedly doing now. Who do I want to address? What occupies their minds? What worries them? What appeals to them? What kind of resistance to figuring out their retirement plans do they experience? And most of all: how is this resistance expressed? Because that is going to be different for different people and different target groups.”
What are those differences?
“We basically distinguish three types of resistance: reactance (defiance), skepticism, and inertia, (passivity). When there is reactance, people feel threatened in their autonomy, which makes them feel defiant. Then you have to invest in trust. Skepticism comes from uncertainty and is created by, for example, fear of change or not understanding the material. Then you have to create accessibility and clarity. Inertia is the most challenging resistance: people are willing, but they take no action. Then you have to find some way to create action and commitment. And you can’t really tackle any of this until you know what type of resistance you’re dealing with in your specific target group. The tricky part is: when it comes to retirement, a combination of all three of these types of resistance plays a role.”
What is the solution?
“First of all: you must realize that there is no quick fix. An informative website is not going to make any difference. Pension providers are going to have to really delve into the behavioral issue and conduct thorough analyses of all their various target groups to come up with good solutions. You can’t just improvise on that. It takes time, money and energy, but in the end it’s worth it. Because once you know how to motivate your target group, all kinds of really good, creative applications become possible.”
“Once you know how to motivate your target group, all kinds of really good, creative applications become possible”
Can you give an example?
“Organ donorship is one of the themes that, just like retirement and pension plans, has to deal with all the different types of resistance. Yet, Brazil succeeded in drastically increasing the number of organ donors through a very special campaign. They capitalized on the deep love Brazilians have for their soccer club. The campaign used the idea that you can become immortal and that your love for your soccer club can live on in someone else. Donating your organs as a way to become immortal; just as immortal as your love for your club. In the first year of the campaign, the waiting list decreased to virtually zero. This is a great example of overcoming inertia by creating commitment. People knew rationally that donating organs is important, but now they had a feeling to go with that, a drive that inspired them to action. And that makes all the difference.”
This is how young people think about retirement
Young workers (under 35) seem to care less about their retirement benefits. But is that really the case? We asked four young people: Annelies (27), Job (33), Agnes (28) and Dionne (28).
“I know very little about it”
Annelies Rijstenberg (27) has her pension invested with a high risk. For the past three years, she has been working as a consultant for project management and risk management for projects related to infrastructure and mobility at phbm, an consultation firm for projects related to infrastructure and mobility. “When I applied here, I was not thinking about a pension plan,” she tells us. “I took it for granted that there was one. I didn’t know it was not something automatic.” Every once in a while, her employer invites someone to come and speak about pensions. Annelies knows something about it now, but not as much as she would like. “ The man that came, explained that you can invest with a low, medium and high risk and that when you’re young, you don’t have a lot to lose, because you haven’t accumulated a lot of pension yet. So, I opted for investing with the maximum risk. For the rest, I don’t really know what it all means, to be honest. I blindly relied on him. It is so abstract, I tend to think: here’s someone who knows about this, so it’s probably ok. Now that I say that, I think: good job, Annelies. Usually I want to know all the risks, and this is my work after all.”
Annelies’ boyfriend just started a job with no pension plan. “We were just talking about this recently. For him it’s not an issue that his new employer doesn’t have a plan, but he was kind of thinking: Shit, now what? He’s 32 and now he has to figure out his own pension plan. It is an uncomfortable subject. It all sounds so far away, but at the same time, time flies.
After our talk, I decided to take a look at what I have accrued so far. If I keep working like this, I will be getting about € 2000 a month in the future, including OAP. And that’s not very much. And it remains to be seen if there will even still be any OAP in 40 years. Everything is pretty uncertain, but that is the gist of it. The more I talk about it, the more I realize that I know very little about it. It feels similar to my student loan. I kept thinking: No problem, I’ll easily pay it off once I start working, but it’s not that easy. Our retirement is far in the future, but you can’t live completely in the moment; you are creating your future. I want to start learning more about it now.”
“Pension plans still feel like an “adult thing”
Job Boodt (33) trains baristas at Bocca Coffee Roasters, a company that roasts coffee and (primarily) supplies the hospitality sector. “I know there is such a thing as pension and kind of how it works, but I wouldn’t be able to tell you right off the bat what kind of pension plan I have, what kind of consequences it will have and whether I should adjust my career and lifestyle for it,” he says. “Pension plans still feel like an ‘adult thing’, but I’m realizing now that it’s about time for me to start thinking about it.”
When he started working for this company four years ago, the pension plan was the last thing he was thinking about. “This job is the result of a career switch. My goal had been to work for a company where I could learn as much as possible. For my happiness in life, the direction of my career and the company I work for is more important than knowing exactly how many Euros I’m getting over a certain number of years. For me, that is not a deciding factor.”
The future? No idea
He doesn’t know how much he will get per month in the future either. “The last time I saw any figures about that was when I was still working in the hospitality sector. I think it was about twenty bucks a month, or something; hopefully it’s a bit more now. I don’t actually have any idea. I don’t know anything about the coverage ratio either. I get an email from them once in a while, with information about my pension. I look at them, but I don’t see a lot of info that tells me very much. I think it’s probably not bad. Everything is well-organized in the Netherlands. But maybe that’s a false sense of security. I don’t think I’ll be getting a great deal of money in the future either.”
Inheriting a nice sum
He believes his contemporaries don’t think about money for the future as much as previous generations. “Nowadays, there are more people that are going to inherit a nice sum from their parents. I have parents that worked hard too; I know for sure that there will be something for me when they’re gone.” Will he be paying more attention to whether a job comes with a good pension plan or not when applying for jobs in the future? That depends on the job, he says. “I work in a fairly specialized field; it’s not like I get to choose from a bunch of different employers.”
“All his pension savings are gone. I am not entitled to anything”
Truck driver Agnes Visser (28) never gave much thought to her pension, but since her boyfriend died, she knows how important it is to set up something for it. If you die before your pension goes into effect, your partner and kids are often entitled to a survivor’s pension. But if you’re not married and you’re not registered partners, you have to register your partner with the pension administrator yourself. In their case, this was never done. “My boyfriend suddenly died from a heart attack,” she tells us. “He was only 34; not an age where you’re thinking about your mortality. So, no, he didn’t have anything set up, in that sense. He had been working as a truck driver since he was 18, so he had accrued quite a bit of pension over the years. But now that’s all for nothing. He can’t enjoy it himself and whatever savings there were don’t go to his parents or to me. Because we were not married, I am not entitled to anything. It’s just gone. That’s harsh; he worked hard for that for years.”
Important to think about it
She wants to warn others about it. “I have noticed that a lot of people in my environment are not aware of any of this. I didn’t know anything about it either. So, if you’re living together, make sure you have a registered partnership. I can’t really think about it yet, but if I do meet someone else in the future, there will be some documentation a bit sooner, with respect to these things. If you’re going to pay into a pension, it’s important to think about this.”
She herself, had a lot of jobs where she didn’t accrue any pension. “I worked a lot as a temp and didn’t really pay attention to pension. I never looked at it when I applied for jobs.” But she has been working as a truck driver for the past three years and she is accruing a pension through her employers. “That is a very reassuring thought, that there will be some income in the future. I haven’t accumulated much yet. I think I get about 400 Euros a month right now, but I want to have a big savings account that I can do what I want with. Something for a rainy day; you can’t go wrong with that.”
“I invest money for my retirement every month”
Dionne Knooren (28) has been working as a freelance online marketer for the past year and a half and is the owner of the platform Ondernemen als een baas (Doing business like a boss), where she writes about her pension, among other things. Before this, she was working at a startup, where she was not accruing any pension. She has been responsible for her pension for some time and she is consciously working on it. “I thought: how can I sustainably invest the money I earn for the future? What is convenient, what is wisdom, how can I ensure I will have enough money later? As a freelancer, you can earn a lot of money, but you also have to take care of a lot of things yourself, including your pension. I started to delve into the options and risks of investing.”
She started with this in 2017, on a small scale, with 50 Euros. Now she invests some money every month. “I earn on average between 8,500 and 10,500 Euros a month. As soon as I pay myself, a portion also goes to the investment account. I buy trackers every month (which, simply put, you can use to buy all the shares of an index, such as AEX, ed.), in which the risk is spread out. When they have increased in value, I will sell them and in this way I have built up a portion of my pension. I currently have about 20,000 invested. My goal is to invest 250 Euros every month; 100 Euros a month is my minimum.”
Investing for the future
She can simply do without the money. “I literally don’t feel like I’m missing anything, putting away this amount. I don’t have to make any big sacrifices and I can do all the things I want to do. I only invest money that I don’t need right now.” In addition to the investment account, she also has a pension account and a CD ladder, where she can’t touch her money for a particular period of time, at a higher interest rate. “Every three months, some of that money is released, which I then put into a new CD ladder.”
In addition, she has bought an apartment in Amersfoort as an investment for the future and she has a passive income of 250 to 450 Euros a month. “I have two websites and blogs and I wrote an e-book about Pinterest marketing. I get money through advertisements and affiliate marketing – where I get a certain amount when someone buys something through me. I also bought a lot of URLs, so that it can still expand. I want to have multiple options. My goal is to have a pension of 2,500 a month later, in addition to my OAP. And, if possible, I’d like to retire early.”
Young companies hardly mention pension provisions in their vacancies. Read here why that is not an item.
Why young companies do not mention pensions in vacancies
Nearly a million people in paid employment do not have a pension plan. Most of these are people under 35. Retirement is the last thing on the minds of many young employees. For the older generation, a good pension plan was one of the main employment conditions, but this no longer seems to be the case. In job openings ads, pension plans are barely even mentioned. Not even if the company does offer a good retirement plan.
“When you work full-time in paid employment, you’re working, on average, one day a week for your pension.”
Online supermarket Crisp summarizes the advantages of working for the company in a job opening ad for a Commercial Analytics Manager. “Competitive salary with opportunity to obtain a share in Crisp.” “Fun Friday afternoon drinks, events and tasting sessions.” “A challenging environment with big responsibilities.” “The opportunity to contribute to the construction of a company that is going to change the food system in Europe.” The word “pension” is nowhere to be found.
And Crisp is not the exception. Leaving out any mention of a pension plan has been more the rule than the exception in personnel ads the last few years; especially among “young” companies. For the startup Crisp, that is a conscious choice, says CFO Michiel Roodenburg, because the plan is still being developed. “We have been in operation for two years now, and we are still researching what kind of pension fits in best with our company. We are convinced that pension is an important way to reward and motivate our “crispies” and to express our appreciation, but it is a complex subject that we want to think about very carefully. Once you’ve chosen a particular pension plan, it’s not easy to revise it.” But even when the plan is complete, Roodenburg doesn’t think it will be a subject that gets mentioned in job ads. “It needs to be there, but we’re finding that there are other motivators that are greater. The need to contribute to a better world, for example. That is something that we stand for. That’s important to people, just like a sense of inclusivity, small egos, being able to work together easily. People sometimes ask about pension plans during job interviews, but not very often. Compared to other retail companies, we have a relatively young population. For them, retirement is very far away.”
Not much interest
Shipper FlixBus doesn’t advertise with a pension plan either, although it does offer one. “We have a fairly young team and we notice they don’t really care about that,” Jesper Vis, managing director at Benelux says. “On the contrary, many young employees hate the pension contributions. They’d rather have that money in their account now.” Potential new employees rarely ask about it in job interviews, Vis says. “People that apply for jobs here often assume the pension plan is fine. It is kind of taken for granted.”
Not a priority, but they do want information
Bol.com offers two pension plans (the required “basic pension plan” with the industry-wide pension Retail fund and a top-up scheme for employees with higher wages), but also does not mention this in job ads. “Of course, there is limited space in our job ads,” spokesperson Tamara Vlootman declares. “This is usually not the first thing people look at in a new job, so it’s not at the top. But there is certainly information about it, and we take our duty of care about this very seriously.” More information about the pension plans is available on the website, and before they commence employment, candidates get the entire employment terms and conditions on paper, including an explanation of the pension plans offered.
Flexibility is important
Employment market expert Fedde Monsma is seeing that particularly in the hospitality and retail industry – sectors with a lot of young employees – pension is hardly ever mentioned in job ads. And if it is mentioned it is very briefly. “It might say something like “affiliated with pension fund X” or “Plan Y”, but not what that means. I don’t know if that is a recent development. Pensions have always been kind of misunderstood in job ads. Even though it is a significant employment condition, which you pay a lot for. If you work full-time in paid employment, you’re working an average of one day a week for your pension. Along with your employer, you are investing about 20 percent of your gross wages; that’s a lot of money.”
Monsma thinks the current generation doesn’t value pension as much as previous generations. “Money is still the primary employment condition, but you’re seeing that people in their twenties and thirties find other things just as important, such as being able to be flexible with their time. That is a big shift.”
Pension is not automatic
In 2018, the Central Bureau of Statistics was commissioned by the Ministry of Social Affairs and Job Opportunities to calculate how many employees in paid employment are not accruing any pension. That turned out to be 13 percent, which amounts to 856,000 people. These are primarily young people. Half of the employees with no pension is under 35 years of age, Minister Koolmees wrote to the House of Representatives at the time. In 98 percent of cases, this concerns small companies with less than 10 employees.
Employers have no pension obligation, unless this is made mandatory by the pension fund in the sector. The majority of the population comes under such a requirement and therefore has no choice regarding their pension. They automatically accrue their pension and so, in the eyes of employees, it has become something automatic, argues Monsma. Even though a pension plan is not at all automatic.
Individual responsibility too
Monsma believes that the fact that at least 1 of 8 employees is not accruing a pension is a worrisome development, but working people also have a responsibility in this: “You have to take a good look at your employment package when you work somewhere. Not only for now, but also for the future. It seems strange to me that people do a lot of research before they buy a fridge, a house or a car – is it efficient enough, big enough, how much does it cost? - but when it comes to work, they scan the employment terms and conditions and all they see is the number next to the gross wages and they sign on the dotted line. As an employee, you need to know what the consequences are of not having a pension plan. People who don’t have anything set up and think they can get some kind of pension later, will only have themselves to blame when they end up getting just the Old Age Pension, which is very minimal.”
Curious what young people think about pension? Read the interviews with Annelies, Job, Agnes and Dionne.
Just had a son or a daughter? You are allowed to take five weeks of additional leave as of July 1st as a partner. The salary payment will be continued by the UWV (Executive Institute for Employee’s Insurances).
So, that is a nice option. But how about the accrual of pension: does that continue as usual in the meantime?
The five workweeks of additional leave are a great addition to the five days of parental leave every partner is entitled to anyway. This latter leave is paid in full by the employer.
However, some rules apply to the new leave arrangement. For example, these five weeks can only be taken after the first parental leave of five days. In addition, this additional parental leave has to be applied for at least four weeks in advance with the employer and be taken within six months following the birth.
70 percent continued salary payment
The UWV takes over the salary payment during the leave. That means a temporary drop of income. The UWV pays 70 percent of the salary and applies a maximum daily wage. For many employees, this daily wage can deviate quite significantly from their actual - higher - daily wage. In some cases the employer supplements this payment up to 100 percent by the way.
And what about the accrual of pension?
The opportunity to take care of your child for five weeks obviously is a priceless experience. On the other hand, it is also smart to calculate everything properly in advance. For now, later on and in the future. Because what about the accrual of pension: will that continue as normal during those five weeks? That differs per pension arrangement. The accrual of pension can often be continued partially or voluntarily.
Even more leave
The government is looking to expand the arrangement of paid parental leave even further in 2022. At the moment, parents are allowed to take 26 weeks of additional unpaid leave. In the future, nine of those weeks will be paid at 50 percent of salary. This leave can be taken up to eight years following birth, but continued payment only takes place in the first year. The Lower House of Parliament will vote on this issue after the summer.
More information about the Law on implementation of additional parental leave (Wet invoering extra geboorteverlof, WIEG) can be found on Rijksoverheid.nl
What is the hot topic in the Netherlands when it comes to pensions? From the news of the turret in The Hague to the kitchen table in Drenthe: we take stock for you on a weekly basis. This time - obviously - the developments regarding the new system.
Everyone will benefit
As the Lower House of Parliament has also agreed with the consequential steps, the government, employers and employees are able to further elaborate on the pension agreement of 2019. The new pension system has to be implemented in full no later than 2026. The new agreements focus on the future pension scheme. According to Minister Wouter Koolmees of Social Affairs, that scheme will be beneficial to everyone.
But what was it again the reforms revolve around? A brief update.
More honest for young people and small-scale entrepreneurs
The major difference is that in this new structure not the payments are set but the collected pension contributions. That is good news, mainly for young people. They now accrue less pension proportionally compared to their older colleagues, while they pay the same amount of contribution. Young people will benefit more in the future of the investment returns of their pension fund.
How small-scale entrepreneurs are able to accrue a better pension will also be elaborated. It is the intention for them to be able to register voluntarily at a pension fund in their industry.
More risks but also more security
The returns on investments will be allocated almost directly to the pensions in the new scheme, instead of to a financial buffer for bad times. That also has a downside: if the economy faces difficulties, the pensions will be lowered sooner. This means the risks for the participants will increase. However, employers will be given more security because they know exactly what amount of contribution they have to pay.
No more fuss about coverage ratios
The major advantage of the new structure is the absence of any discussions about the (low) actuarial interest used to calculate fixed pensions. Also the coverage ratios that are constantly decreasing and increasing depending on the economic developments cease to exist.
How about the accrued pension rights?
The government, the employers and employees have agreed that all the accrued pension rights will be combined with the entitlements accrued under the new rules. The way in which this takes place, still has to be elaborated. This also applies to the compensation for older employees by the way, who will accrue less pension in the future.
Threat of reduction not over yet
Agreements still have to be made on handling the low coverage ratios (the ratio between the money funds have in cash and the money they need to be able to pay the pensions) applicable to many pension funds at the moment. The risk of pensions being reduced in the meantime still exists.
State pension age rises less quickly
The state pension age is rising more slowly as of 2024. Instead of 12 months, it rises with only eight months for every year we - on average - are expected to grow older.
No indexation for now
Inflation correction of the pensions will not be applied in the near future. As long as the current pension scheme is into force, reductions continue to be possible, says Minister Koolmees in an interview with the newspaper Algemeen Dagblad. He points out that many pension funds are up to 20 percent below the required coverage limit of 110 percent due to the current low interest rate. Indexation will only be possible above that limit.
Pensioners fear for major pension reductions during the transition period towards the new pension scheme. Senior citizens’ organizations are therefore calling for a transition scheme reducing the chance of this happening.
What should you do if 10 percent of your pension is suddenly deposited into your bank account? That is a question many Dutch people will be asking themselves when they are able in the future to withdraw a part of their accrued assets at once.
The new pension agreement will probably enter into force as of January 1st, 2022. One of the alterations is that people are allowed to withdraw up to 10 percent of their accrued assets at once as soon as they retire. This so-called lumpsum offers more opportunities for pension participants to enjoy their free time sooner. More freedom of choice also entails more questions. For example, if you choose to withdraw a lumpsum, your future pension payments will decrease. And who knows what will happen financially or health-wise in a couple of years?
Trip around the world
Bart Kuijpers, senior researcher at APG Asset Management, investigated the way people are best helped making those choices. The main thing should be, according to him, that this important change is clearly communicated. Opting for a lumpsum now has major consequences later on. “You could use the money to pay off a mortgage or even for a trip around the world. That is great, as long as it doesn’t lead to a pension payment later on that is too low. If you withdraw too much from the pension pot, you might not be able to maintain your desired standard of living in the future. Some participants can afford it, for others it is better not to opt for the lumpsum.”
Kuijpers can imagine that participants with poorer health are more likely to choose for an amount at once. The same applies to people who want to donate money to their (grand)children. “Participants with a good health and no immediate spending purpose are less likely to opt for a lumpsum. They benefit more from a higher pension payment in the longer term.”
The choice to withdraw a lumpsum is indeed entirely different for every participant. After all, we all have different financial needs and possibilities. That is exactly why it is so important for people to be accurately informed. According to Kuijpers, that information can in the first place be found at portals such as mijnpensioenoverzicht.nl and the ‘My’ environments of pensions funds. There are several financial planning tools for a customized advice, such as Helder Overzicht & Inzicht. “These tools allow you later on to easily see the impact of a lumpsum on your future pension payment”, Kuijpers says. “It is obviously also possible to combine those tools with a personal conversation with a pension advisor - always a recommendation.”
The lumpsum may be new to the Netherlands, people in, for example, Great Britain already have five years of experience with this phenomenon. The tax authorities allow the Brits to withdraw a payment up to no less than 25 percent of their pension assets. Smaller pension assets are usually withdrawn at once and people with larger assets often withdraw amounts gradually, Kuijpers knows. “Many participants follow the offered standard option of gradual withdrawal or opt for a lumpsum. Young participants choose for a lumpsum more often, probably because that allows them to stop working sooner or partially prior to the retirement date.”
The Brits mainly use their lumpsum to save (32 percent) or to invest (20 percent), but also for home improvement, a car or vacation (25 percent) or to pay off debts (14 percent). In short, sensible use in the majority of cases. “There are a few examples of people squandering the lumpsum to then rely on social welfare, but that does not happen on a large scale.”
Now or later?
The word squandering is a bit of a delicate subject: to what extent are people capable of making wise financial choices for their future? They are not, is the conclusion of behavioral scientist Dan Ariely. Upon the release of his book Geld en Gedrag (2018) he said in newspaper Trouw: “Unfortunately people are built in a way that we have far less consideration for our future selves than we have for our current selves, that we rather spend money instead of saving it.”
However, the opposite also occurs. Kuijpers knows that Australians, for lack of lifelong payments, often draw upon their pension assets (too) carefully out of fear for an old age in poverty. He furthermore sees most participants in other countries spending their money wisely. “There are always exceptions, and that is why the lumpsum in the Netherlands is maximized to 10 percent and can only be withdrawn on the pension date.”
It continues to be difficult to convince people to think about their pension on time, that is a known fact. We usually only think about it later on. That later awareness is slightly less severe for the lumpsum, Kuijpers explains. “The lumpsum can only be withdrawn on the retirement date. And although we advise not to postpone your choice until the very last moment, there is also no point in choosing years in advance. All kinds of things could still change prior to your retirement, like relocation, illness or divorce.”
The side effect of the introduction of the lumpsum could possibly lead to participants showing more interest in their pension, Kuijpers believes. “They are given a bit more control on the payment thereof.” And, in any case, that is a positive development.
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.
Caroline Bruls (30) is an actuary, or the fortune teller of the pension fund.
What is it an actuary actually does?
“As insurance mathematicians, my colleagues and I are responsible for, among other things, the payments a pension fund has to make. Part of our job is to calculate the contribution needed for next year. We take a look at how many people are accruing pension for instance. And we examine how many people are retiring, how much pension they will receive and whether they have partners as potential survivors. We compare the outcomes of these investigations with the amount of money available in the fund. That results in the coverage ratio. As long as that coverage ratio is at least one hundred percent, a pension fund is able to continue paying the pensions until the distant future.”
Has it always been your dream to become an actuary?
“No, it sort of just happened. I didn’t even know what it was exactly at first. I just bumped into the position during a two-years starters’ action plan at APG. I immediately enjoyed it. In the meantime, I have been doing this job for five years now. Prior to this, I studied. First economics, later on econometrics. After that, I followed a post-graduate education to become an actuary.”
What are your main tasks?
“We develop mathematical models for future payments. We do so based on assumptions regarding the risks for the pension fund. What is the life expectancy of people in general, does he or she have a partner and are there any young children? We furthermore use statistics to assess the chance of dying and incapacity to work. And we also check afterwards whether our assumptions were correct.”
Isn’t that boring?
“No, on the contrary. We try to predict the future in an ever-changing world, and who doesn’t want to do that? People may think we are still struggling with papers and a calculator. But because of the technological progress and the availability of increasingly more data, we are able to make faster and more advanced calculation models. This means we are able to conduct much more extensive risk analyses and provide our clients with more insight. But you do have to love working with figures if you are an actuary.”
And you love figures?
“I really enjoy calculating, inventing solutions and transferring information. And the fact that we provide pension funds with direct information, enabling them to determine their policy.”
Does the participant have any awareness of the work you do as an actuary?
“We calculate the amount of the pension contribution. And we calculate the coverage ratio. This latter indicates whether there is space for indexation, or that pensions have to be reduced and to what extent. A possible reduction and the maximum compensation for inflation is dominated by statutory rules by the way.”
How far ahead do you look into the future?
“Pension funds have to guarantee lifelong payments. Also when people reach the age of one hundred years or more. That is why we are trying to look into the future for up to one hundred years ahead.”
How do you know how old participants will become?
“We use the prediction of the average life expectancy provided by the Dutch professional association of actuaries and data of the Dutch Central Statistical Office. A Dutch person retiring now, still has about twenty years to go. But we adjust that information specifically to every pension fund based on data in our own administration. The officials of ABP, for example, appear to live approximately three years longer than the national average after they retire. Construction workers at BpfBOUW equal the average figures.”
Do you also calculate the individual pension payments?
“No, but we do calculate the basis for the independent payments. We use a computer system to calculate the individual pensions.”
What is the biggest challenge in your work?
“To predict the distant future, using a lot of mathematics and statistics. And to then explain the outcomes to the management of a pension fund. The same applies to the impact on the coverage ratio and the pension contribution when a management team is looking to change its policy. Or when employers and employees want to change a pension scheme.
What I enjoy the most is being able to transfer that information properly. If they are able to make their decisions using our data. It also pleases me when I see the face of colleagues light up and they say: Now I get it.”
Patroesjka Zuurhout, strategic product developer at APG, gives tips. And why is it that many self-employed people are not (yet) involved in a pension scheme? Her column was published today on Intermediair.nl
As a self-employed person it is best to start building up a pension quickly.
The majority of employees accrue compulsory pension through their employer. As a self-employed person you are responsible for arranging pension income, in addition to the AOW. The possibilities are also there. What prevents self-employed workers from saving for their old age?
The number of self-employed people has continuously increased in recent years. In 2019, the Netherlands had 1.1 million. If you also count those who earn extra money as a self-employed person, this number will be even higher.
Many self-employed people have been hard hit by the corona crisis. It is therefore logical that their attention is now mainly focused on "daily bread". A pension is then of later concern.
Still, it is smart to think of 'later'. Because the earlier you start saving, the longer the investment can pay off. This not only prevents a drop in income; it also means that less investment is simply required to achieve the desired pension.
But how do you build up such a pension? Saving, investing, paying off the mortgage (extra) or selling the company are some possibilities. However, you miss the tax benefits that specific pension solutions do offer.
Sometimes, however, these advantages are available. For example, if you terminate a permanent employment. In some cases it is then possible to continue your former employer's pension scheme voluntarily. Legally this is even allowed for ten years.
Are there also options for a supplementary pension with tax benefits that are accessible to all self-employed persons without employees? Yes. Think of annuities and bank savings accounts. You can also take advantage of the Fiscal Old Age Reserve (FOR). This means that you can enter part of the profit on the balance sheet as a pension reservation. You must of course really put that money aside for this.
All options naturally have their advantages and disadvantages. First, consider how much money you can afford right now. And, more importantly, what you need later. And what do you want to arrange for your next of kin? Does the pension product provide for this? Wijzer in Geldzaken provides information about pensions for self-employed professionals: link.
In addition, you naturally want to have a buffer for setbacks, illness and disability.
There are often good intentions. However, most freelancers do not act on that. That threshold fear is partly based on ignorance - how and where should I arrange it? - and partly on ostrich behavior. Behavioral scientists have carefully analyzed the barriers. 1. Affect: not wanting to think about being old and stop working. 2. Present bias: procrastination. 3. Social comparison: others are not concerned with this either. 4. Complexity: it is difficult to properly understand options and consequences.
In short, the thresholds need to be lowered urgently. And the great thing is: that is going to happen. Self-employed workers are also addressed in the new pension agreement. More recently became known about the further elaboration of this and the package of measures for the self-employed. The various sectors will work with social partners and self-employed organizations to investigate how (more) self-employed persons can voluntarily join the pension scheme of the sector or organization for which they work. This is a real opportunity.
The pension fund for the construction industry (bpfBOUW), for example, is one of the providers that develops a low-threshold pension product for self-employed persons. Participation in this is voluntary. For example, you can accrue pension at bpfBOUW as an employee and as a self-employed person.
There are, of course, no suitable pension plans overnight. There are still some experiments beforehand, with the new legislation.
And freelancers also require a change in thinking. From "now" to "later". From "wait and see" to "action". After all, support among self-employed persons is a precondition for the realization of carefree old-age provisions.
Patroesjka Zuurhout has a background in economics and business economics with a specialization in strategy, entrepreneurship and financial economics. As a strategic product developer at APG, she is responsible for developing products and services related to income for later.
Today, we as APG publish our annual report for the year 2019. You can read how we worked for eight pension funds, 22,000 employers and, through them, for 4.7 million people in the Netherlands last year. For APG, pensions are about people, about life and about living together. We want to make a difference so that we, our parents and our children have a good income, now, later and in the future. Our annual report 2019 describes how we have worked on this over the past year.
Key points of the annual report:
- Growing satisfaction among members and pension funds
- Giving more people insight into income for later and their pension assets
- Financially good year: increase in turnover and lower costs per participant
- High yield, but slightly less than the average in the benchmark
- Insight and action in pension administration through data analysis
For its pension funds and their participants, APG achieved a return of 17.3% and an additional return of 56 basis points over 2019. At the same time, APG succeeded in lowering the average price per participant to €67.30. In addition, APG provided 975,000 participants with insight into pension assets and 1,845,000 participants with insight into income for later. APG's revenue in 2019 was €944 million. The net result came to €53 million. APG achieved a strong reputation score of 70.7.
Certainties in an uncertain period
Gerard van Olphen, Chairman of APG's Executive Board: "To be quiet about. In 2020, society will face an unreal situation full of uncertainty as a result of the coronavirus. It is precisely in such a period of uncertainty that it is crucial that there are certain certainties on which people can rely: electricity, water, light, medical aid. But also the financial infrastructure, payments, and therefore pensions. By offering the same services as always, we contribute to the confidence that is needed in society in a situation like this.
As a result of this crisis, the new pension contract has not become less important, but less urgent. Wherever possible, we will investigate in the background, explore alternatives and calculate variants. So that, when the time comes, we won't have stood still in this area either."
APG can look back on a financially strong year. But things also went wrong due to errors in pension administration. The bar needs to be raised, according to CEO Gerard van Olphen and cfro Annette Mosman. But first it's all hands on deck to deal with the consequences of the corona crisis. Read the entire interviewhere: ‘If the basis isn’t in order, you lose people’s trust’.
‘If the basis isn’t in order, you lose people’s trust’
APG can look back over a financially strong year. But some things also went wrong due to mistakes in the pension administration. The bar must be raised, say Chairman Gerard van Olphen and CFRO Annette Mosman. But first it’s all hands on deck to deal with the consequences of the coronavirus crisis.
Even APG’s Executive Board is working from home on account of the coronavirus crisis. Just like nearly all the three thousand other employees who now work from their dining tables or their attics to look after the pensions of 4.7 million participants (nearly a third of the Dutch population) for the eight affiliated pension funds including ABP, bpfBOUW and SPW. Pleased that the switch to working from home has gone so smoothly, Gerard van Olphen and Annette Mosman - responsible for finance, risk management and data - look back via video call over the first few weeks.
As a result of the coronavirus crisis everything that came before suddenly seems far removed. And yet it’s worth pausing to look back at 2019. It was a strong year for APG: pension values were further increased by good financial results, a fine return on investment and lower costs. But there were challenges too: for example APG as an investor slightly underperformed the market average, a few things went wrong with pension administration, and APG has some work to do to catch up in terms of making its own corporate management sustainable. So this year too there’s plenty of work to be done.
First of all, the coronavirus crisis: how is APG dealing with it?
Gerard: ‘First of all we're taking good care of our employees, both in the Netherlands and in Hong Kong and New York. We’re supporting people maximally in working from home and we’re paying extra attention to internal communication. We also understand and pay attention to the difficult situation that some colleagues are currently in, such as combining work with taking care of their child, informal care or other situations. We also pay special attention to the health of our people. We’re also offering our help externally. Employees with a background in care can be placed with hospitals on full pay. On behalf of the funds we have also made student accommodation that we own or rent available as emergency hospitals, and we are supporting hospitals in the North of Italy in which we invest. Furthermore we have invested nearly ninety million euros in corona bonds for our clients: the funds raised are used to combat the pandemic and its socio-economic consequences. In consultation with the affiliated funds we are also adopting an accommodating stance with companies in problem sectors with regard to possible reductions or holidays in contributions or dividends.’
Many people in the Netherlands are afraid their pensions will be reduced.
Gerard: ‘Well, we’re certainly not going to reduce them during the year. At the end of the year we will look and see whether that is necessary. In the first quarter of 2020 the coverage ratios of the pension funds fell as a result of falling stock prices and turbulent financial markets, but for any decision to reduce pensions we do not look at the current situation.’
Annette: ‘Pension is uncertain and subject to numerous influences that we explain to participants as best we can. So we can’t take away the growing uncertainty about future pensions, but we will see to it that monthly pension payments continue normally even in these uncertain times. People can count on their income just as always, and that contributes to peace and confidence in society.’
How do you look back at 2019?
Annette: ‘Financially it was a good year. First of all we sold our insurance company Loyalis in order to concentrate on our core activities. As a result we were able to pay a super dividend to the affiliated funds, which will largely end up in participants’ pensions. At the same time total revenues increased and we managed to reduce costs. In this way we maximize pension value and make sure that as big a proportion as possible of each euro paid in works to the benefit of the participants. It also enables us to invest more in communication with participants and employers, for which we have set up a new business unit.’
Not everything went well last year: for example there was negative publicity about errors in the pension administration.
Gerard: ‘Yes, there were a number of things that we simply didn’t do right. For example, at the beginning of last year, it was discovered that over 500 ABP participants had for years been receiving a partner supplement to which they were not entitled. In some cases people were suddenly asked to pay back thousands of euros. We came in for a lot of criticism over this. We hadn’t fully realized what an impact this would have on participants and hadn’t properly thought about an equitable solution. In the end, ABP called a halt to the demands for reimbursement and gave back the money that had been reimbursed. Conversely some 600 participants had received too little supplement; they have since been paid with retroactive effect. And then we found out that there were 16,000 people who hadn’t applied for disability pension because they didn’t know they were entitled to it. We immediately contacted these people to tell them how they could apply for this pension.’
Shouldn’t APG have opened up sooner about the mistakes and how they were dealt with? Participants had to take them to TV consumer programs like ‘Kassa’ and ‘Meldpunt’.
Annette: ‘The affiliated pension funds are the interface and the point of contact for the participant. So we must be more transparent toward the pension funds concerned about mistakes, problems with data and the possible solutions to them. If they’re informed in good time that something has gone wrong, they can pro-actively communicate with their participants and seek solutions. This would partly avoid problems ending up on Kassa.’
Gerard: ‘The annoying thing is that when we do something wrong, it’s the fund concerned that has to face the music. As administrator, we can’t take part in Kassa ourselves, much as we might like to take responsibility. For example, there was one couple on Kassa who had received three letters with corrections in two years. That damages credibility. It’s only natural that people then start to wonder about reliability and competence in general. It’s a struggle. This year we really need to pull our socks up and improve our quality.’
What specifically are you doing to prevent these kinds of incidents in the future?
Annette: ‘We learn from them. Together with the pension funds we’ve set to work determinedly on further simplifying pension regulations, systems and application procedures and we're busy with data cleansing and verification. We’re making employees aware that the bar’s been raised and we’re making use of new technology to be able to take the next step.’
Gerard: ‘The basis must be in order. Because if the pension administration is not right, you lose people’s trust, however much you might invest in communication with participants. With the new pension contract the bar will soon be raised even higher: all data will have to be correct and complete and seamlessly dovetailing with the data of the UWV (Employee Insurance Agency) and the National Insurance and Pension Agency. So we really need to work our way up from Premier League to Champions League.’
In view of the current crisis, does it still make sense to agree on a new pension contract that shifts the risk more toward the participant?
Gerard: ‘We’re going from a pension guarantee to a pension ambition: an estimate of future returns. The old system is no longer sustainable, but in the new system as far as we're concerned three principles remain unchanged: collectivity, solidarity between generations and an obligation to save for later. The coronavirus crisis does make it all the more urgent to cut through knots in the debate about the new pension contract. APG is actively thinking about this. We are working out how various scenarios would be, suggesting alternatives and looking at the specific implications for participants and employers, with the emphasis on comprehensibility and feasibility.’
Annette: ‘We also want to help people now to think about their future financial situation and making the right choices in good time. With this in mind, we’ve developed Clear Overview & Insight, with which you can compare your expected pension with your current pattern of income and expenditure and see whether you're going to have enough. APG aims to present itself as a trusted guide, offering people insight into their income now, in the near future and later.’
APG also positions itself as a responsible investor, and makes demands of its investees in terms of sustainability. However APG itself seems not yet to be meeting these demands overall. How are you going to change this?
Gerard: ‘The affiliated funds, particularly ABP, but also bpfBOUW, aim to be global forerunners in sustainability policy: responsible conduct in the areas of environment, working conditions, diversity and human rights. Together we have established firm ambitions which are aligned with the Climate Agreement, for example for CO2 emissions of the equity portfolio. We take account of these in our investment decisions and we talk to investee companies about them. But this of course implies that we must also set a good example, and that's where we still fall short. Our CO2 emissions as an organization are relatively high, from our establishments in the Netherlands, Asia and the US and because we travel a lot. We’re looking now at how we can reduce our environmental footprint, for example by making our offices more sustainable, more videoconferencing and thus less travel between establishments and for our work.’
Annette: ‘We aim to be transparent about our sustainability performance too, both as regards the investment policy pursued on behalf of the funds and in our own business management. This year we’ve taken the first step toward integrated reporting: one annual report in which we render account of progress toward both financial and non-financial objectives. That’s actually quite difficult. For example, before you can report properly on sustainability, you first have to know what goals you want to make measurable and to what extent. That’s what we're busy with now, so that next year we’ll be able to show what we’ve achieved across the entire breadth of our business, what’s going well and anything that still isn’t. There are many benefits to be derived from this. This transparency can also contribute to society’s confidence in us.’
Read the interview with Ronald Wuijster: ‘In both our investment and our remuneration decisions we look to the long term’
At first when APG tried to invite me for this little talk they couldn’t get hold of me. Because I automatically threw all the letters they sent me in the wastebasket. That’s what I do with all post from all pension funds, whatever the subject may be – it all goes unread into the wastebasket.
And I’m certainly not the only one who does this. That’s what all Dutch people do with post from pension funds.
Well it’s kind of logical, isn’t it? After all, it’s never good news... About pensions? Everyone in the Netherlands is dead scared about their pensions. I think it’s safe to say that the less you know about your pension the more soundly you sleep.
Unfortunately that’s not what the minister wants. On the contrary, he wants pension funds to give the public better and clearer information about their pensions, how much they are, whether they’ve saved enough and what they can do to make it better. At least that’s what he said in a letter to parliament that came out last month in which the law on pension communication was evaluated.
So the pension funds have been given a virtually impossible task to perform. They have to get through to the public with a message that nobody wants to hear.
So what CAN they do to get Dutch people to read their pension post?
I would say; pension funds, cut out the jargon.
What for example do you make of the words ‘coverage ratio’? That’s a term my father always used on the farm when talking about the performance of Belle Jelle. Belle Jelle was a stud bull, I should point out, and every now and then he had to pay the cows a visit, I’m saying it as nicely as I can, and then a record was kept of how many he’d visited: the current coverage ratio to be precise. And sometimes the farmer was critical of this and then they called it the critical coverage ratio.
All in all not words that should be used by a nice, sober, upstanding pension fund, it seems to me. And to avoid misunderstandings too. Why not just say ‘the money that funds have to keep in cash’, or ‘cash reserve’. I think everyone would get that straight away.
Another term funds use, which I always find very intriguing, is ‘longevity risk’!
Surely if you live long that isn’t a risk? Well, apparently it is for the pension funds. That’s fine if that’s what they think, but it’s not the sort of thing you come straight out with like that surely? For goodness sake, just be a bit normal! It sounds a bit like ‘it would be great for us if you could die as soon as possible, preferably before your retirement date, because then it costs us less’. At least that’s how it seemed to me. Just saying.
And then korting [the Dutch word means both ‘discount’ and ‘cut’]. This too I find a confusing term. When I hear korting I think “Oh, great!” But with pension funds it’s just the opposite, right? So I’d prefer them to say ‘you will get less pension’ or ‘pension reduction’, that would be clear. The same applies to indexation. If like me you aren’t an economist you really don’t know what that is. Call it pension increase.
Or what do you make of ‘invaren’ [meaning to sail into a narrow passage]. Employees’ pension entitlements that you can invaren to the new rules, they’re laid down in the pension agreement. As if it’s about a huge ship that you have to dredge the harbor for.
But that won’t be the case for most people, right? For most people it’ll be no more than a sinking dinghy if you insist on using the term invaren. I would say: transfer. But at a macro-stable discount rate. ‘cause an unstable discount rate is not something you want to be around too long.
And then the damping of the hard luck and good luck generations. You know about that? Whole generations that get damped by the pension funds? Seemed a bit lugubrious to me, but it turns out to be about compensation. It means that generations that haven’t saved much pension money are compensated by the generations that already have billions. Well that’s positive, isn’t it? So I wouldn’t call it damping. But solidarity. Words matter.
Are there any good pension fund jargon words? Yes indeed, there are.
For example I really like ‘sleepers’. They’re the people that don’t move their old pension entitlements to their new fund. It reflects well what these people are: sleepyheads, or better still snorers. People you have to shake to wake up. So the pension funds can continue to use that word, no problem.
Talking about continuing: the pension funds must of course continue come what may. After all it’s great that they're there. And you’d do well to write a bit more often and positively about how great our pension system is. Our pension system is the best in the world. Yes, it’s OK to say it now and then!
Maybe the funds have to start their post with that as standard.
I bet people will actually read it.
Politicians, the pension sector and social partners cannot let the pension agreement fail.
Gerard van Olphen already gave that message in his New Year's speech at APG , and today he makes the appeal again in the Financieele Dagblad.
Minister Wouter Koolmees (Social Affairs) wants to finalize the development of the pension agreement on April 1st of this year, which is seen as quite challenging. The words of Gerard van Olphen during the interview leave no room for doubt in that respect: "We have a hundred days left for a debate that has been going on for eleven years." In the FD he states that a pension agreement after the summer or after the elections amounts to "playing for time, which does not do justice to how important it is for the Netherlands to regain confidence in the pension system." Van Olphen points out that the parties at the negotiating table "are cherishing their contradictions" and have dug themselves firmly in their foxholes - while those contradictions are smaller than the first eye suggests. He warns against a "horror scenario" (premium increases, future accrual decreases and cuts in pension benefits) that may arise for funds if the deadline of April 1 is not met, and Koolmees does not subsequently grant approval for postponement of pension cuts. Not that a finalized agreement solves all pension problems (such as longevity risk and low interest rates), but "at least a new perspective emerges and people can regain confidence in the system," said Van Olphen in the FD. You can find the full story here (in Dutch, and only accessible for subscribers to FD).
While the majority of the largest Dutch pension providers no longer accept new clients for pension administration, the door at APG is now open again.
That is the scope of an article (only available for FD subscribers) today in the Dutch newspaper FD.
APG thus meets a clearly present need in the market. "More and more pension funds are complaining that they have great difficulty finding an administrator for the administration of their pensions," writes the FD. Because the market for smaller pension providers has become less attractive - scale is needed to operate cost-effectively in this sector - they have increasingly withdrawn. New customers must meet a certain profile at APG, as APG chairman Gerard van Olphen explains in the FD interview. To contribute to APG's scale, they must have a certain minimum size. The pension plan of the relevant fund must also match that of the funds that are already customers of APG. This is not the case for very complicated, deviating regulations.
To make the subject more transparent and to serve the social significance, pension will become a permanent theme on Follow The Money, the platform for investigative journalism. Editor-in-chief Eric Smit: “Pension is everyone’s business. But at the same time, it is such a complicated matter, it requires expertise we are lacking in Dutch journalism. We are now training such expert.”
The fact that it will take a couple of months before pension gets a permanent spot on Follow The Money, certainly doesn’t mean that editor-in-chief and founder Eric Smit is unfamiliar with the topic. As soon as the subject comes up, he talks non-stop about asset management, fully funded pillars, how the contribution-based system is historically arranged in the Netherlands and about pension capital invested abroad. “I am not a pension specialist and am therefore looking at this topic from a distance. Slightly critical, but mainly curious”, he interrupts his enumeration.
As an example of matters he would like to understand better, Smit mentions the yield spread throughout the years - investing in the Netherlands versus investing abroad - and the diversification strategy. Or, as he moves on to yet another topic, the way in which pension funds are acting with regard to the commercially operating insurers. “I find that intriguing. Insurers have a profit motive and use all kinds of pension products to ensure that the insured persons are able to enjoy a certain pension. That has changed quite a bit in the past few years. From a pension promise with overall assurance, we, as a society, have shifted towards a system where the risk has been devolved to the citizens. Both pension funds and insurers go along with this devolvement. That’s a drastic development.”
Actuarial interest is interesting but complicated
The current events involving coverage ratios and actuarial interest are also occupying Smit’s mind. “The Netherlands has quite a unique funded pension system and the concept of actuarial interest is very interesting to me. Mainly because it’s partly a rational consideration and partly almost a political assessment.” As interesting as he believes the topic is, it is very complicated at the same time, according to Smit. And that’s exactly the reason why the editor-in-chief is placing this theme on the agenda of FTM.
He continues: “Pension funds are richer than ever before and yet the agreements are not being honored. In other words: people think their pension would grow along with them, would be indexed, but that hasn’t been the case anymore for many years. The premiums are even increased. How is that possible? That is very difficult to digest for many people and not easy to explain. But we want people to understand.”
Responsibility for investment decisions
Where the actuarial interest is not the responsibility of pension funds, as it is imposed by the government, Smit says the funds can be held accountable for the investment decisions they make. “Think about the tobacco industry. Only after 22 years (!) of massive compensations paid by American tobacco firms, the funds here decided to no longer invest in tobacco. That was actually not before the beginning of last year. It is bizarre to see with how little perseverance the governments and pension funds are acting.”
A pension fund must really consider what they’re investing in, says Smit. And pay attention to matters such as (social) sustainability and the business model of companies. “Journalists look at those things critically. And also at the efficiency of the investments. What are the corresponding costs? Is the choice made for private equity and, if so, which one(s)? What does it yield, can it be done more efficiently, and can the investments made be more passive, so the investments don’t result in the outrageous wealth the management teams of these private equity firms are gaining now? I am not suggesting this area is all black & white, but it is complicated and important. It involves a lot of money, belonging to many Dutch people. And that’s why we will start devoting really close attention to the subject.”
Lack of substantive knowledge within the journalistic branch
Follow The Money has always paid attention to pension, but really taking a deep dive into the topic requires a journalist who fully gets to grips with its complexity, Smit explains. “You need someone who knows all the ins and outs. From asset management and supervision of conduct to investment strategy and legislation.” And even then, it’s not easy to communicate about pensions. “Even the people within the pension industry itself are hardly able to re-interpret all the facts for the public.”
But, according to Smit, it’s not just FTM neglecting pensions. Dutch journalism as a whole is not paying enough attention to the theme, according to the editor-in-chief. “The financial knowledge in journalism is rather sparse. Pension is the most difficult file there is. All the more reason for us to be reluctant starting the theme: the ideal polymath in journalism who has this knowledge, has not yet been found. But... We are training this person now and his name is Thomas Bollen. He has matured for a couple of years and is almost ready to dive into the difficulties related to pensions. We will start writing good explanatory articles to eliminate the comprehension gap between the pension industry and the public. We can then look critically at the content, such as the pension system.”
Look inside the world of pensions
The fact that FTM will be assisted by APG - Gerard van Olphen has offered for the investigative journalist to visit and see how APG, and with that, the pension industry works, pleases Smit a great deal. “APG has a tremendous amount of in-house knowledge, so we will definitely accept that invitation. By participating in background conversations, we gain more understanding on the importance of our topic, assess our own insight and write better articles. That doesn’t mean we will become less critical.”
In addition to attention for pensions, Smit believes investigative journalism in general is important. “We are chasing politicians, find out where the community funds end up. We take a closer look at matters that concern everyone. Such as the price of an airline ticket. How expensive is it really when including the subsidies, infrastructure and kerosene? It is our duty to investigate certain matters.”
How do people make pension choices? Professor Henriëtte Prast speaks during the APG Summer Course - an inspiration meeting starting today for directors of pension funds - about the application of insights from behavioral economics in the customer journey.
By using proper communication and offering appropriate choices, the behavior and attitude of a customer or, more specific, a pension participant, can be guided. Emotions, evoked by language, play an important role in this process. Says Henriëtte Prast. And in order to properly arrange a customer journey, one has to know the psychological, cognitive, emotional, cultural and social factors of human (financial) decisions, according to the professor. “You first have to know how people think and act when it comes to their financial journey”, Prast explains.
What is the most crucial insight from behavioral economics pension funds should start working with?
“The fact that people, when it comes to making complicated choices, drive on intuition instead of on rationality and that setting aside money is systematically postponed. Even if people have all the knowledge in the world, know that pension is important and want to have a good pension. The way in which choices are offered therefore has a major impact on what people will “choose”. The key to success is to make the “right choice” easy. This is mainly due to the fact that intention does not translate into behavior which, consequently, makes it irrelevant to influence the intention by means of education and information.”
And how do you guide people towards making the right choice?
“There are several ways to achieve this.
First: offer the “right choice” as the silent choice. In other words: silence means assent. If you want people to set aside money for their pension, you can achieve this by offering them a solution in which they save automatically, unless they opt out. Take a self-employed person, for example. Now, if a self-employed person doesn’t take action, he/she is not setting money aside. That system should be adjusted: a self-employed person not acting, is setting money aside. And he/she must actively opt out should he/she not want to save for a pension.
Second: respond to emotions using language. We have to start reaching people in a different way. Pension funds now communicate with rational information: factually correct, not misleading and understandable. When they talk about pension accrual, they use words from a concrete domain: war, battle, build. But we have to start wondering what works for what target group. Ask yourself what image is portrait by language. If it evokes a positive association, it increases the interest in pension, but otherwise it repels participants. And the pension communication is actually not considering the above.”
Other options are:
- Offering a self-binding mechanism: if you sign now (December), your holiday allowance will automatically be transferred to your pension account;
- Limiting the possible choices;
- And framing the pension outlook in percent of the current income instead of in Euros.
How progressed in fact is the pension industry in applying the principles from behavioral economics?
“I only see few convincing examples. That will partly, but not solely, be due to the fact that the government and regulatory authorities set out rules based on an outdated model to raise awareness.”
Communicating with participants is not always easy. The Dutch are “consciously unconcerned” about their pension and do not read their pension communications. So, how can we reach them at all?
“Communication is not the solution if you don’t offer meaningful choices. The goals of pension communication are clearly described. And one of these goals is for the participant to know what choices he/she has. What should you be thinking about? For example, I am of opinion that my pension is insufficient in the low scenario. So, I would like to make the choice of hedging that downside risk. This cannot be done by extending the work life in due time, as the pensionable age also is the mandatory retirement age. Save more? But then I would have too much pension if the realistic scenario or the windfall scenario comes to pass. Moreover, what should I invest the money in? I am not following the course of my pension fund, because, in that case, the value of my money would actually decrease in the disappointing scenario.
The only example of a choice I encountered is: choose to retire early. That could be the case if your pension outlook is more than sufficient - a luxury situation. And you can always decide later on whether or not to retire early. In short: why spend time on reading information if there’s nothing to be gained from?”
The APG Summer Course is an inspiration meeting for pension fund managers of funds that are clients of APG. During this summer school we challenge administrators and ourselves with new insights from "outside".
One of the speakers was Henriëte Prast: professor Personal Financial Planning at the University of Tilburg and an expert in the field of personal financial planning and the role of feelings and emotions involved.
PWRI won the Golden Pension Pro Award during the Pension Pro annual congress last night. The APG fund can call itself Best Dutch Pension Fund 2019 with this public award. The personal pension pot of ABP and APG’s new public report ‘Walk with us’ won the Pension Pro Award communication prize.
Readers and listeners of Pensioen Pro, the Financieel Dagblad and radio channel BNR rewarded PWRI with the public prize. Other contestants were ABP and Thales Nederland.
In the jury report, the jury calls the PWRI inclusion project "special and admirable." "PWRI exercises its influence to enforce inclusiveness in companies, so that its own participants - people who are at a disadvantage on the labor market - are given a job." The jury speaks of a completely unique form of engagement in the direct interest of participants. " This creates involvement with and proximity to the people on whose behalf all our efforts are made."
Kees Bethlehem, chairman of the PWRI board: “This prize is an encouragement to continue. I hope that other pension funds draw inspiration from how you can give substance to the S of ESG as a pension fund. We are open to exchange of views, and possibly cooperation, in this area. "
The personal pension pot of ABP was given the communicationprize with star as the is charmed by the possibility to offer participants direct insight into their accrual. "Deserves praise. Bold, good timing in the national pension discussion. Insight into the personal pension pool involves the participants in retirement, and that is - and is becoming - increasingly essential."
Con Snijders (project manager Personal Pension Pot): “We are happy with this recognition. We see that participants are much more positive about their pension at ABP by seeing their own pension pot ”.
Also recognition for APG
It is the first time that APG itself has been nominated for a Pension Pro Award and also wins. The professional jury calls the APG public report “a great initiative that offers clear insight to people with little pension knowledge. Good for the sector as a whole and cleverly implemented.”
Dunja Wasserman and Erik van Dam (both Communications Advisor APG) received the award in Amsterdam.
Erik: “Actually winning this great prize points to recognition that we have succeeded in making both pension and APG accessible to a wider audience. By thinking differently and applying new techniques. "
Increase pension awareness
The praising words of the jury endorse the purpose of the report. Dunja: “We have asked ourselves how we can bring Dutch people, and in particular the people who build up pension, into contact with pension in an accessible, relevant and fun way. And at the same time we tell who we are and what we do for retirement. For that reason, it has been decided to translate the annual report into a public-friendly version in an innovative, interactive and personalized video format.”
Head of asset management at APG, Ronald Wuijster was profiled in The Financial Times this week, to discuss his asset management work, as well as the many recent pension reform developments in the Netherlands.
The Dutch government agreed this month to delay changes to the retirement age, but cuts to payouts by occupational pension funds still loom. The proposed reforms will shift more risk and responsibility on to individual savers. The FT aimed to find out more about these reforms, from the viewpoint of APG, Europe’s largest pension fund manager.
“People assume there are no savings left”
Even though the Dutch pension system ranks as the world’s strongest, trust in the Dutch pension system has sunk. Nearly two-thirds of Dutch people are not confident they will be able to retire when desired or maintain their standard of living in retirement, according to a survey by State Street in 2018. Young people in particular feel unfairly treated as their contribution rates have increased but they fear the system will run out of money before their retirement arrives. Wuijster: “There has been so much bad press that people assume there are no savings left at all for pensions. In fact, there are substantial sums of money that have been saved that can be used for pensions.”
“Too much risk buffering”
“I feel there is too much risk buffering in the system. That is my personal opinion,” says Wuijster. Dutch pension funds are required to use a highly conservative discount rate to calculate liabilities, which means that most have seen no improvement in their funding position. Occupational pension funds must also maintain sizeable solvency buffers — additional funding — to ensure they can meet payouts.
Making people more conscious about pension
The article highlights the personal pension pot and the ‘clear overview and insight’ service as examples of how APG works to make people more conscious about their pension. “The reality is that 75 per cent of the pension must be earned from investments. The contributions from employers and workers amount to 25 per cent. Savers don’t realize about discounting or the time power of money,” explains Wuijster in the FT profile. It also mentions the Groeifabriek and initiatives such as Kandoor, with which APG is working on innovation for ‘the day after tomorrow’.
Achieving a good return in a sustainable way
Over the past decade, APG has delivered net annualized returns (after fees) of about 10 per cent for its largest client ABP, the pension fund for government and educational employees. “We have had 10 years of great performance and we expect returns will be lower over the next decade,” the asset management head cautions in the article.
APG has also already reached its 2020 target for decarbonizing its portfolio and is thinking about fresh objectives in the environmental, social and governance field. Wuijster talks about APG’s second major goal: to contribute to a sustainable world as an investor: “We try to engage with energy companies and to make them aware of the challenges of climate change, but we don’t say no to fossil fuels today. We need to be realistic and look to influence the change.”
Gerard van Olphen, Chairman of APG Group's Executive Board said: "Today, a new and important step towards a renewed pension system was taken.
At the same time, I note that a lot of open ends remain. These need to be resolved in the coming period under under the direction of a steering committee that consists of cabinet and social partners. It is now important to speed up, so that there is clarity as soon as possible for millions of participants who are in uncertainty – and who would like to know where they stand. We continue to make available our knowledge and expertise to help build a renewed pension system for the Netherlands."
Na vele jaren is er eindelijk echt zicht op een pensioenakkoord.
There is still a lot of work to be done, because the details of the contract and the transition have yet to be finalized. It is still to early for what APG would like to do - informing participants, on behalf of the funds, about the consequences of the agreement for their pensions; let alone to implement the agreement. For the second pillar, the agreements therefore are a step in the right direction, but not yet enough so to provide participants with the clarity they are expecting and are entitled to. However, the advantage for them is that a collective contract is still possible, which allows for a higher pension. There will be more room - albeit limited - for freedom of choice.
Key aspects of the pension agreement:
- The State pension (AOW) age will rise more gradually.
- Earlier retirement possible for those in arduous occupations.
- Adequate pension for all workers.
- No reductions in the event of a coverage ratio above 100%.
- Termination of the average premium system
- Introduction of new collective pension contract.
- More options for participants.
- Revision of dependents’ pension based on advice of the Dutch Labor Foundation (Stichting van de Arbeid, STAR).
What is APG’s view?
We asked Gerard van Olphen:
What do you think of this agreement?
Gerard: “In the end, only one question is really relevant: How does the agreement affect the participants? Viewed from that perspective, the picture is concrete and positive for pensionable age and arduous occupations. The fact that pension savings will continue to be based on a collective approach is also in the interest of the participants, because this will ultimately result in a higher pension. But it is still too early to assess the effects of the new contract and how well-balanced the transition will be. There are still quite a few open ends that need to be resolved under the leadership of a steering group consisting of government and social partners. I would like to see a lot more clarity here, in view of the millions of participants who are in a state of uncertainty and would like to know where they stand.”
What does this mean in terms of potential pension cuts?
“As far as the short term is concerned, it is a gain that no reductions will be necessary in the event of a coverage ratio above 100%, as this is extremely difficult to explain to participants. The downside is that with the current funding ratios, it may well be necessary to cut when the funding ratio are below 100%. This means that cuts are not off the table. In any case, the fact there are no pension cuts above that 100% mark, makes a big difference.”
What does the agreement mean for the idea of individual pension accrual?
“In part through experiments at APG on providing overview and insight, the social partners have been persuaded that you do not need individual pension accrual to give the participant the necessary insight into how much has been accrued for him or her within the collective assets. Individual accrual would mean a lower pension outcome for participants. And that’s not necessary, as long as you show the participants how much has been saved for them and help them gain overview and insight into the process. In addition, the agreement allows for pension saving by self-employed persons in the second pillar. This possibility gives pension fund bpfBOUW for example, more opportunities to offer a good pension to all workers in the construction sector.”
Details of the contract and the transition have yet to be finalized. What is still to be done? “The agreement in principle is particularly clear where the state pension (AOW) is concerned. It might prove to be more of a state pension age agreement than a pension agreement. As far as the second pillar is concerned, a first step has been taken but a lot of work still needs to be done. This work has now been delegated to a steering group of social partners and members of the Dutch government. They will still have to answer important questions about the form of the new pension contract and a well-balanced transition. The Dutch Labor Foundation (STAR) still has to answer important questions; about the form of the dependents’ pension.”
So we still have a way to go?
“Of course. It is still not clear what the final agreement will look like. But it is a first step in the right direction.”
Today APG is launching an accessible, public-friendly version of its annual report: ‘Walk with us’. With striking online clips on social media and other channels, we invite people in to step into an interactive video (filmed from the viewer’s perspective). They then actively walk through the pension year alongside APG. On their way, they encounter a number of relatable dilemma’s about money, sustainability, and the future. The choices they make, tell us something about the user’s attitude and determine the next part of the video. That way, people are only shown things that are relevant to them. Step by step, users learn more about pensions and the role APG plays, for them and for the Netherlands.
After the video, the viewer is redirected to a personalized website. This website offers in-depth information about the subjects that were touched upon in the video. This can include topics like our investment results and the ways we provide more insight into pensions. The choices the viewer made during the video will determine the information they are presented with afterwards. As people are constantly on their cell phones, the video and platform were designed especially for use on mobile phones. They can also be viewed on a computer. The subjects which you see in the video and the platform, are based on the text form APG’s Annual Report 2018. ‘Walk with us’ is all in Dutch, because it’s developed for the people in the Netherlands.
The public report returns
People have to deal with many things in any given year. Also in terms of pensions. It has become difficult to truly get through to people amid the overwhelming amount of information on a subject that has become emotionally charged. And yet, pensions are important for everyone’s future. The actions we take now can affect our situation later on. Together with the pension funds we work for, we constantly look for innovative perspectives to make pensions accessible. We are transforming our annual report on this basis - just like last year-, into a public version ‘Walk with us’. That is why we asked ourselves how we could bring Dutch people, particularly those accruing a pension, closer to their pensions in an accessible, relevant and fun way. All while explaining who we are and what we do for their pensions.
Looking for fresh angles of approach together
As a pension administrator, APG takes care of the pensions of over 4.5 million people in the Netherlands. We are the largest pension administrator in the Netherlands and as such we play an important role in society. Together with various pension funds and employers, we use all of our knowledge to offer the people who accrue their pensions with them the maximum amount of value for each euro they put towards their pension. The more accessible, personal and relevant we make pensions, the greater the chance of the message getting through. Therefore, together with the pension funds we work for, we're constantly looking for fresh angles of approach to make pensions accessible.
APG has had a challenging year in 2018. Decreasing stock prices in the fourth quarter led to a negative return for pension funds. And despite all the efforts of those involved, there is still no new pension agreement. That means uncertainty for many pension fund clients and their participants. CEO Gerard van Olphen and fellow Executive board member Ronald Wuijster, responsible for asset management, look back and ahead and explain how APG deals with pension dilemmas, like return versus sustainability and bonuses for investors”.
The lengthy discussion about the pension agreement in Dutch consensus politics, the global political uncertainty, the fall in interest rates and the strong decrease of the stock market in the fourth quarter: 2018 was not an easy year for APG. There was a negative yield. Although bpfBOUW was still able to indexate slightly at the beginning of the year, the cover ratio of client ABP fell below 100%. That means that we’re once again facing the possibility of pension cuts at ABP. Indexation had already been scrapped. Stock markets have now recovered and APG's invested assets are higher than ever at 500 billion euros. These concerns aren't yet behind us, say CEO Gerard van Olphen and Ronald Wuijster, CEO of APG Asset Management and responsible for the asset management of the affiliated pension funds, including ABP, bpfBOUW and SPW.
What gave you sleepless nights in 2018?
Gerard van Olphen: “What I found the most challenging were the external circumstances. We're working hard on pension value: our aim is to create as much value as possible for every euro that participants put into their pension. Over the past year, we've taken a few good steps: we're strategically on track, we've reduced the average administration costs per participant by six percent and we have offered people more insight into their pension. At the same time, the market continues to be plagued by the prospect of cuts due to low interest rates. The lack of a pension agreement also continues to decrease the confidence of participants and public support in general. That doesn't make it easier.”
Ronald Wuijster: For us as investors, the biggest challenge came at the end of last year. In the first nine months of 2018 it seemed that we would be able to achieve a reasonable return, but in the last quarter there was a sudden downturn. We're here to get a return for the participants, so a negative result is the last thing we want. Although we've outperformed the market with our investments, it remains very frustrating. Not least because we would have liked to have kept ABP's cover ratio out of the danger zone.”
Pension assets are higher than ever. So how come there’s no indexation, and there might even be cuts?
Gerard: “Yes, that does give a bit of a mixed feeling , and it’s almost impossible to explain. Since 2008, our assets have doubled, but due to the extremely low interest rates the pension commitments increased even further. As I explain this, I’m well aware that it doesn’t help people put bread on the table, and that comes hard. There's not much that we as APG can do about it. The rules call for high cover ratios in order to meet the pension commitments. That underlines the importance of quickly reaching a pension agreement based not on a pension guarantee, but on a pension ambition. That way, pensions can start to keep pace with the economy, creating more room for indexation, but the downside is that pensions will get cut sooner. ”
Does APG itself have to communicate differently with the members?
Gerard: “The pension sector, and therefore APG, has always given people the feeling that their pensions would turn out well in the end and that they didn’t need to worry too much. That led to the expectation that their pension was guaranteed. Now that there is no indexation and there are even sometimes cuts, people are saying: I’m not getting what I'm entitled to. That's an entirely logical reaction. As a sector, we have simply not clearly communicated the fact that pensions always feature an element of uncertainty and that people need to prepare themselves for their future financial situation.”
People also don’t understand why APG still pays out bonuses in the event of a negative return.
Ronald: “I can well imagine people wondering about that. We invest for the long term, so we assess our performance over the long term too. Over the past decade, we've achieved an average of ten percent return per year for ABP. In 2018, total returns ultimately turned out negative due to the poor stock market, but the unlisted investments did perform well. We outperformed the market there. Besides that we reward people for non-financial performance, such as leadership and teamwork. That means that with bonuses we don't look at that one less good year, but at the long term and at the whole.”
Still, it sounds quite a lot: around 31 million in variable pay and five people who earn one million or more.
Ronald: “31 million euros is a lot of money, but in fact it’s ten percent of our total cost. Around five million of this is paid out in the Netherlands, and the rest abroad. The five people who earn a million or more work in America. To attract top investors there, you sometimes have to accept variable pay. You also have to look at the returns. Because these top investors are able to generate extra returns in the long term, this variable pay will pay itself back many times over.”
Gerard: “To be perfectly clear: my fellow board members and I don't receive any variable pay. This variable pay is only intended for a small group of investors. At APG, we do three-quarters of all investments ourselves. That means that you have to attract the right people. If you invest in the construction of a motorway in Australia, for example, you need people who know the market: boots on the ground. It's not practical to manage a billion-dollar portfolio by phone or Skype from Amsterdam. You can also outsource investments, but that costs a lot more. So we only do that when there's no other way. Besides this, the amount of variable pay will not be visible when you outsource investments, as this is done by the external party. While we want to be transparent about it.”
APG manages Dutch pension funds, so why does it invest mostly abroad and not in its own country?
Ronald: “I understand the question, but the Dutch economy is only 1% of the world economy in size. Global investments offer more opportunities for returns. We also want to benefit from the growth in Asia, for instance. And you don't want to put all your eggs in one basket, but spread the risks as much as possible. However, we are planning to invest more in the Netherlands in the coming years. We're already involved for example in the financing of the Afsluitdijk, energy-efficient housing and wind turbines. There are also other investments in infrastructure, such as a better connection between Schiphol and Amsterdam. In many countries, such projects are financed by pension funds. This could also be an attractive option for us, as long as the returns are good.”
What if APG has to choose between returns or sustainability when making an investment decision?
Ronald: “It is primary our task to achieve a good pension for the members, that is why a good return is needed. But we also want our investments to contribute to a good living environment, because otherwise that good pension won't be of much use to you later on. A good pension, in a sustainable world, emphatically in that order. Besides, in practice, we barely face a dilemma between profitability and sustainability. In fact: the fact that we look not only at the financial figures, but also at sustainability, helps us to make better investment decisions.”
Why is APG still investing in companies like Shell?
Ronald: “You can decide not to invest in this type of company, but then you can't exert any influence as a major shareholder. As an investor, we prefer to remain involved. Shell is working on the transition from fossil fuels to new energy sources, partly because of the pressure we put on the management. Ideally, you could say that using fossil fuels should stop tomorrow, but that's unrealistic: the world can't do without them. We don't take an activist approach, but we do make our voice be heard.”
APG plans to focus more on participants and has appointed a fifth board member with this responsibility. What will the participants notice in concrete terms?
Gerard: “In a new pension system with less guarantees and more freedom of choice, people have to take more responsibility for their own pension. They have to make important choices, despite often not having enough knowledge or desire to delve into it. Once a year, we send participants a virtually incomprehensible pension statement. Seventy percent of the people throw the envelope straight in the bin. That shows that you have to make pensions simpler and more accessible and help people become more pension-conscious. Examples include a digital 'pension check-up' at life moments like marriage, divorce, having children or changing jobs. A quick check: how does that affect your pension? Last year for example we developed the Personal Pension Pot for ABP. This helps 850,000 Dutch people to see how much money there is for them in the pot. In the coming period, we’ll be talking to participants about how we can give them more support.”
There are also 850,000 self-employed people without a pension in the Netherlands. How are we going to deal with that?
Gerard: “That's worrying. If self-employed people don’t build up a pension, this could lead to poverty among the elderly. Most employees work one day a week for their pension. As a result, the Netherlands has 1400 billion euros available for retirement provision. Self-employed people can voluntarily build up a pension, but they don't always do so. If you give people the choice of locking up their money for forty years or spending it today on a new TV, they'll go for the latter. But no two self-employed people are the same. You have the redundant construction worker who becomes a freelancer out of necessity, and then there’s the well-paid IT professional or interim manager. We believe that the government has to take measures to protect the vulnerable self-employed people and the middle group. We’d therefore considered it desirable for there to be a compulsory pension for the self-employed. Because this does not seem politically feasible and there is also insufficient support from self-employed people, you can think of intermediate forms that also address the core of this problem, but that offer more scope for customization. "
Finally: will there ever be a new pension agreement?
Gerard: “In the Netherlands we judge British politicians on how they are dealing with Brexit. The pension negotiators should watch out that they don't start to behave the same way in the pension agreement discussion. Some might be thinking along the lines of: we have until December 31, 2019, so let's negotiate until Christmas, because that will step up the pressure for a result and perhaps a party will start to move. But this leads to great uncertainty for the Dutch pension participants. The parties concerned have to be made aware of the emotions that this evokes in the country. They have a duty to make a decision and finally let people know where they stand.”
Working abroad means that often you build up pension in that country. Which doesn’t make it easier to get a clear overview of what you have built up where.
If it is up to the European Union, a European pension platform offers a solution. An international consortium of experienced pension providers, including APG, is working with the EU on the creation of such an European pension platform. Call it a Track & Trace of your pension.
The consortium and the EU already started in 2013 with the basis development of the concept. Now the project team is ready for the next phase: a pilot in which the existing website www.FindyourPension.eu will be expanded step by step. Generic pension information will be offered from several European countries. How is pension arranged in, for example, Germany or Belgium? The website will also be a starting point for people to get help in tracing their pension in at least five European member states. During the pilot the technical basis for the European track & trace functionalities will be set up as well. The ultimate goal is to connect as many European pension parties as possible.
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- average return around 7 percent
- implementation costs lowered
- growth in sustainable, renewable investment
- innovation through cooperation with funds
APG achieved an average return over 2017 of around 7 percent (over the different funds, this varied from 5.6 to 7.9 percent) for its pension funds and their participants. At the same time, APG succeeded in reducing the implementation costs per participant whilst maintaining high quality service provision. APG is a financially healthy organization. APG’s turnover for 2017 was €1,052 million. The net result was €47 million. These results were announced in the Annual Report 2017 published today.
As a leading investor, APG developed new initiatives. In 2017, for example, APG announced that it would be investing in Chinese equities together with E Fund. APG and E Fund, one of the biggest investors in China, are sharing knowledge in the field of asset management, ICT and pension administration. The partnership fits into APG’s strategy of expressly investing in sustainability and growth markets. APG expects to achieve more return for participants in these markets in the long term.
Recently, APG announced that it would be using artificial intelligence for sustainable investment. To this end, APG acquired the data analytics activities in this field from Deloitte Nederland. This business unit is well known for its great expertise and knowledge at the cutting edge of artificial intelligence, big data, and sustainable investment. The takeover will significantly accelerate APG’s use of artificial intelligence and big data for sustainable and responsible investing.
Cooperation with ABP and SPW resulted in innovative products for participants. With ABP, the personal pension pot was developed: an attractive visualization which provides the participant with easy insight into the accumulated pension. Together with SPW, Helder Overzicht & Inzicht was launched. This gives participants in the fund a clear overview and easy insight into their income and expenses on their retirement.
Besides the three ‘traditional’ variables of risk, return and costs, a fourth variable is very important for the more than 700 APG investors: sustainability. An increasing percentage of the invested assets are invested sustainably. Pension funds and APG believe in achieving a good pension in a sustainable world. With investment returns expected to decline in the near future, APG is looking for alternative investments and working towards ‘enterprising investment’.
APG manages around 470 billion euros in pension assets and ensures that over 4.5 million people can be confident that their accrued pension rights are properly invested, administered and paid out.
Gerard van Olphen, Chairman of the APG Group's Executive Board: “In the past year, we have expressly aimed at increasing our pension value for our pension funds and their participants. In concrete terms, we want to offer participants the most income years for later. By achieving good and sustainable returns on the one hand and reducing our implementation costs on the other, we have taken good steps in that direction in 2017. We therefore look back with satisfaction at 2017 and will do everything we can to continue this line now and in the future.”
View APG's full Annual Report 2017 here
This document can only be used for reference; it is a translation into English of an original Dutch document. In the event of any discrepancy between the two texts, the Dutch text shall prevail.
It's hard to explain. Dutch pension funds had last year 1,176 billion in assets. And yet pensions are not completed and is likely to have to cut some funds next year. It has to do with the impact of declining interest on the coverage, which the NRC article eight questions to be put to a variety of professionals in the pension world.
What is the discount rate and where does it come from?
The value of the pension in the future is determined by the discount rate. There used to be a fixed interest rate of 4 percent, since 2007 it is based on the risk-free market interest. If funds have to pay someone 10 years from retirement, they reckon with the market interest rate for a period of 10 years a payment in 20 years with 20-year rates. But who at the beginning of his career going to build retirement may get only about 55 years of retirement. Because interest rates are unreliable for more than 20 years, De Nederlandsche Bank (DNB) has 2012 introduced the UFR. The regulator has already reduced the discount rate at 2015 and the UFR is now mobile and decreases further.
Low interest rates and affect pension
The pensions have become more expensive, said Onno Steenbeek.The idea of evaporation is nonsense. The obligations have risen faster than the ability because we have calculated that we live longer. Playing ... across the sector
Eight questions about retirement
The eight questions that are answered in the article are:
- What determines whether pension funds should be raised or cut & nbsp; What kind of pension interest charge ?
- What kind of pension interest charge?
- What does the low interest rate than pensions?
- How many billions have been vaporized by the low interest rate?
- Pension funds can also earn as interest rates fall?
- Do people with pension insurance also affected by the interest rate?
- What do political parties do low interest rates?
- What happens if interest rates now would continue to rise suddenly?
How to prepare the self-employed in the Netherlands prepare for their retirement? They often have no, or relatively small, mandatory occupational pension. The key question is therefore: impose self-employed on a voluntary basis money aside and this is sufficient to fulfill their expectations about retirement?
How to prepare the self-employed in the Netherlands prepare for their retirement? They often have no, or relatively small, mandatory occupational pension. The key question is therefore: impose self-employed on a voluntary basis money aside and this is sufficient to fulfill their expectations about retirement?
Various data sources are considered together in order to unravel the puzzle of self-employed retirement. When all the pieces are put together, the impression that the future (pension) assets of self probably does not correspond to their current expectations of the future.
Self-employed and employees have similar expectations regarding retirement and replacement rates (the ratio between the pension and the last salary). For employees with a full career can meet these expectations, provided that their pension fund is in good shape, but it is highly questionable whether this also applies to self-employed. The motivation to save is high in both groups. Maybe even higher among independents. But they also have built little company pension and should build more private capital to get the same pension.
Although self-employed it is important to save for their retirement and this his plan, this is for them still appears to be difficult to achieve. The same problem applies to many employees but self-employed people are in a worse position. They often built too few rights in the second and third pillar pensions. Also, make them face higher mortgage costs after retirement, due to higher outstanding debt and the loss of mortgage interest. In addition, self-employed in many cases substantially more private capital than workers with comparable income. Also an investigation into their more unconventional retirement savings does not suggest that self-employed themselves in another significant way to prepare for retirement.
The Dutch pension system is just like last year in second place in the world of pensions, but runs into the number 1: Denmark. Australia remains in third place. This is evidenced by the annual Global Pension Index Mercer consulting firm in the field of Health, Wealth, Career.
The Global Pension Index
The Global Pension Index compares pension systems in 27 countries worldwide and thus covers almost 60% of the world population. It looks at both government-funded and self-regulated pensions, but also for personal belongings and savings outside the pension system.
The index is based on three elements: future reliability, integrity and adequacy. Although the sustainability of the Dutch system has increased slightly, the degree to which our pensions guarantee a livable minimum wage (adequacy) fell slightly.
Netherlands and Denmark are the only countries with an A-grade: a first-class and powerful pension system performs well, is durable and reliable. However, the Global Pension Index points awarded to which the Dutch pension system could be improved, such as the promotion of employment of older workers.
Confidence fell in pension funds
The participants were asked Mercer how great their confidence in the pension funds. In more than a quarter of the Dutch confidence in their pension fund has declined in the past year. the trust has increased by only 7% of the Dutch. Bartjan Willenborg Mercer: "Almost every day you read in the media negative reports on the financial position of pension funds and reduce pension benefits. Dutch read so mostly what is not going well, but rarely hear what is going well. This gives them an increasingly negative image of the funds and declining confidence. "Participants indicated that their confidence will grow when they have a better understanding of their personal situation. "Make it easy for them by leaving them with the push of a button to see how much is in their pension pot", suggests Willenborg.
Read the full report.
Ethics and integrity was the topic of conversation on September 1 this year at the meeting of the professional associations of investment professionals VBA and CFA. Is a nice mix of ethics and integrity solution for Times are a-changin ', internet, big data, and trust?
Finance part of society
Minister Jeroen Dijsselbloem, Gerard van Olphen, chairman of the APG board, Fieke van der Lecq, Professor of Pension Markets at the VU and Jacob Kohnstamm, former president of the Personal Authority, spoke about their vision and challenges. Fintech experts Don Ginsel Maurice Olijve and Berend de Jong explained how FinTech a blessing or curse can be for consumers. To restore confidence, the financial sector needs to feel part of society. Taking care of other people's money charges a big responsibility with it.
Stop "the drivel about trust
For professionals in the sector, it can sometimes be frustrating that confidence remains low. Just as it seems to get better, new facts throw a spanner in the works. With new rules if it turns out as a result. Specific van der Lecq called to stop with 'drivel about trust; "Be extra careful if you only earn money with money." The challenge in a rapidly changing environment is to think about your own value. What does a consumer or business-specific products and services? These contribute to the operating or the realization of goals of the client? What do businesses and consumers of the sector? Therefore it is necessary to have intensive discussions with the customer. A statement such as 'customer-centric' professed by all operators in the sector. But we know the customer really?
Otherwise acting trust
The FinTech experts gave an insight into the latest developments at the cutting edge of technological innovation and the financial sector. The Netherlands also now has hundreds of startups that focus much more than traditional financials on things that really wants consumers. Confidence appears suddenly to work very differently. New businesses can quickly become part of the familiar environment of consumers, where they reveal a lot of information about themselves. Knowing the customer has become much simpler, but this is always safe? Security is a growing issue and 100% security does not exist. The financial sector understands according to the FinTech experts not enough that the customer behavior has really changed. Time for navel-gazing is not new companies from outside the sector will only too happy to serve consumers in the area of pay, insurance and investment. And often at lower cost.
Delicate balance between convenience and risk
However confront the convenience of FinTech also risks. If personal data (big data) are a means of payment, then we must pay attention, said Jacob Kohnstamm. Create profiles of consumers may have unseen consequences and freedom, autonomy, equality and self-development can be compromised. A dime can not be penny more.
Commonplace and accessible, not easier
Thus FinTech new dilemmas brings along with it. The conversation with the community is essential to maintain the purity of the moral compass, especially in rapidly changing times. Aiming to keep the interests of customers, providers and other stakeholders in balance goes on. Simplify the financial world is not all new providers but commonplace and accessible. To the satisfaction of the customer.
In 'Pension Topics', leading authors from the pension world give their views on the pension contract, investments, governance and governance. The book, edited by Jean Frijns, Carel Petersen and Benne van Popta, offers a broad overview of topics to inspire pension fund directors. Jurre de Haan, Peter Gortzak and Alwin Oerlemans of APG contributed to this report on retirement in the future.
In the chapter ‘Pension system 2025: ready for the next sequence in the 21st century?‘, the authors describe how the world around us is changing rapidly. The preferences and values of the participants are changing, as is society. What requirements will the participant have for a good pension in 2025? And what does this mean for pension administration? This concerns trends that require updating our pension system, including increased need for personal management, a dynamic job market where the economic life of both companies and sectors will continue to decrease, and the sustainability or unsustainability of the current pension contract.
After a description of current trends, these are converted into the implications for consumers in 2025. What will they expect of a good pension? How can the consumer assure his/her income for later and his/her employability in the job market. This is followed by an impression of the direction the pension system may develop, based on the trend analysis and the values for a good pension. The changes also have implications for pension administration. New solutions for the income facilities for later, technological innovations and other wishes of participants and retired employees will result in innovations in pension administration.
In late August APG organized for the sixth consecutive year a summer course for its customers. In three days intensive course was offered with a variety of speakers, workshops, networking events and some evening sessions.
The theme of the program; of society, by politicians and regulators to our customers and the individual participants. And finally answer the question "How APG gets ready for the future?" to support customers optimally herein and servicing.
Next to some speakers APG occurred among others Kees Goudswaard, chairman of the SER Committee Committee on the Future Pension Plan, Gabriel Bernardino European regulator EIOPA, Bert Farmer DNB and Johan de Groot of AFM as a speaker. Then came the customers themselves to the floor and presented their strategic reconnaissance together.
Background of the summer course
During the summer course customers can get to know each other and share experiences, and APG assists them in promoting expertise. And we try participants to inspire and challenge them in a different way to be busy with their own field. Additionally, the course a great opportunity to intensively to exchange views on developments in the pension landscape.
Pension providers are soon 1-0 when they communicate with their participants. "People have to concepts such as 'grass' and 'brick' more positive emotions than 'uniform pension statement' and 'funding'." Neuromarketing help.
The pension participant is a bundle of contradictions. Between thinking and doing there is often a wide gap. And decisions are largely taken deliberately, even though he thinks so. Emotions play an important role. Meanwhile, the pension industry is trying to make the participant (more) aware of his pension and turn it into right decisions. Behold the great challenge for the communications department.
Neuromarketing may help to know the pension participants and better communication better match for him. In addition, marketers apply medical techniques and insights from neuroscience to. This science tries for example with MRI scans to understand how our brains call perceive the world around us, memories of the memory and how we act accordingly. Neuroscience is trying to determine how emotions affect our thinking and how the regulation of emotion, thought and action is done.
Neuromarketing applies this knowledge and research to the field of marketing. The goal is to better meet needs of consumer goods and services and to make marketing more effective.
At a meeting customers Robeco Premium Pension Institution (PPI Robeco) Joyce Sparks told (marketing and communication consultant at APG and involved in neuroscience research into the perception of retirement and pension choices at Dutch pension participants) on the findings of the investigation. APG is through subsidiary Inadmin manager Robeco PPI.
Pension communication is catching up
“Pension Communication is catching up. There is increased use of scientific knowledge in the field of neuroscience, behavioral economics and communication science”, proposes Joyce Sparks.
Read the full article on the website of Robeco.
Change of the compulsory pension fund industry to industry pension scheme. That was the core a bill that Klijnsma Jetta State Secretary of Social Affairs last November in a letter announcing the Second room. Meanwhile appeared Perspective Note from the government on the reorganization of the Dutch pension system. Pensioenadvies spoke with two prominent scientists and also asked to respond to the Pension Federation and the Association of Insurers.
We must go back to the middle of the last century in the history of the current system of mandatory. The mandatory aims to have as many employees solidarity pension within an industry to build and to prevent downward competition on working condition pension in the industry. A mandatory shall be granted at the request of the social partners in an industry under certain conditions by the government. Only the compulsory industry pension fund may carry out the plan. Other parties may not. This is an exception to the competition rules, but that is allowed because it is a service of general economic interest.
Proposal not motivated by coming APF
Pension law professor at VU University Professor Erik Lutjens was one of the authors of the report "Mandated industry pension funds and general pension fund" which was published in September last year at the request of the Ministry of Social Affairs. He says that although the issue of mandatory or came specifically to the general pension fund (APF), the research is not motivated by the arrival of the APF. "The background of the study is that small sector pension funds like many company pension funds to keep their heads above water hard by increasingly stringent governance requirements. During the treatment of the APF bill has come an amendment to allow a merger between mandatory pension industry while preserving the original capabilities through ring-fencing. That did not happen because the State Council here objected to. They objected to ring-fencing because there would arise an unfair competitive advantage over insurers within the mandatory because you take away an element of solidarity.
Mandatory is and remains strong point
An important question is whether the mandatory as part of the national debate on the pension in any case is to maintain? Kloosterboer thinks so. "All sounds have one thing in common: there is a mandatory must continue to pension in the Netherlands. is also evident in the Perspective notes that the government sees a form of mandatory participation in sectoral and occupational pension funds as a strength of the Dutch pension system and that is to preserve "Merchant emits a slightly different sound." The social question is what forms of solidarity we find desirable and whether they have sufficient added value for the participants in a system which is reaching more personal rights and freedom of choice. in such a system is what we are concerned even still talk of solidarity, because you put together the risk of longevity, short life and shares disability."
Netherlands is unique with the mandatory or elsewhere in Europe, including countries that have a similar system? We asked Professor Hans van Meerten, Professor of international pension law at the University of Utrecht. "You have to distinguish between small and large mandatory. The small mandatory means that you as an employee required to participate in the pension plan from your employer, but the implementation is free. At the large mandatory state government that participation in an industry pension fund is binding for the entire sector. In the Scandinavian countries, you have a kind of combination in which the collective agreement determines participation in a pension scheme. However, the implementation is free. What the Dutch mandatory participation in the pension fund unique is that this may be only a Dutch foundation. We are talking about approximately 80% of the Dutch pension participants. I'm a long time whether this is allowed under European law. That obligation proposition has been tested in the past, the question arose whether the scheme was sufficient social to justify the infringement of competition law. But if you look at nationality, I ask myself. Why a scheme could not be implemented by a Belgian party as offering a better pension for the participants.
Read the full interview here (in Dutch).
With The Future of Pension Management, Integrating Design, Governance, and Investing Keith Ambachtsheer gives a current view on pensions. His new book is a must-read for trustees because it alongside the theory of pension fund governance and -beleggen gives many examples from practice.
Principles well defined
Ambachtsheer alerts as no subject and focuses on dilemmas that are discussed at the board table. Like no other Ambachtsheer makes the dilemma of sustainable pensions and income security for retirees negotiable. He referred to Nobel laureate Jan Tinbergen who wants to reach him early on convinced that if you have multiple goals, you need to use multiple instruments. An extremely dedicated book, which he economic theory (Keynes to Piketty) involves the pension domain. His plea for long-term investments (and his criticism of short-term thinking), investment beliefs, the approach to the investment process and the need for scale and efficiency are relevant to drivers.
After it appeared Pension Revolution and wrote with Don Ezra in 1998 Pension Fund Excellence is Ambachtsheer in 2007 on positive developments in governance, pension design, investment and risk management at pension funds. He thereby striking examples from Canada, USA, UK and Europe and shares his lessons learned from interviews with local experts and from international research. He describes the shifts in pension design of defined benefit and defined contribution to defined ambition, the impact of lower expected returns on policies and developments in risk sharing. Ambachtsheer emphasizes the importance of fair risk sharing and the demands it imposes on management and supervision. Most attention in the book is given to investment and pension governance. Little attention is given to developments on the participants side. Changes in society, labor and technology that lead to new questions about freedom of choice and financial planning (retirement planners and robo opinion).
Measuring is knowing
Ambachtsheer works the basic principles of good governance systematically. Thereby are sustainable pension design, good communication with stakeholders, organization design and implementation, effectiveness of governance, risk management, fiduciary responsibility, remuneration policy and principles of the investment at issue. He advocated cooperation between funds which their expertise and influence is enhanced and joint efforts to promote good regulation which fair risk sharing is secured over generations. He advocates the systematic measurement and transparency of results and share the results of research in this field. Knowledge is running as a thread through the book. Theory is underpinned frequent result of quantitative research. Specific attention he pays to the costs of external management. This increase if more layers formed in the investment process. Internal management of large exporters advantageous according to him. In the chapter on culture in organizations Ambachtsheer discusses good and bad examples and lessons to draw from his.
Much attention (four chapters) is given to long-term investing. Ambachtsheer see here positive movements in the pension sector. Investment beliefs, attitude to risk, benchmarking, evaluation and mandate are explained in detail. The industry is working on sustainable solutions and encourages companies to focus on a long-term orientation with emphasis on effects on the environment and other stakeholders. This will contribute to restore confidence. His most important lesson is that it is useful for pension funds to follow a comprehensive and sustainable stakeholder approach in which long-term value creation is central. A separate chapter is devoted to the risks of climate change and its impact on sustainable value creation.
This third book Ambachtsheer offers a compact handbook for good pension. The set-up with short chapters with reference to numerous studies and experts makes it is a readable book that vintage luggage for new and experienced trustees.
Source: Pension Administration & Management, No. 2, 2016
In an interview in Het Financieele Dagblad is Gerard Olphen inter alia, the low interest rates, changes in the pension system and its goals at APG.
Gerard van Olphen: "Pension funds can not blame the European Central Bank of their problems. The interest rate would be low without the incentive of the ECB, which is disastrous for pension funds. Because the workforce is shrinking and economic growth is low in Europe, the rate is structurally low. ECB policy obviously does not help, but is not decisive. "
As regards the future pension Gerard notes the following: "I'm not there. Just like football Netherlands has 15 million in pensions coaches. However, it is up to the pension, social partners and politicians to decide how the system should look like. "
About what he wants to achieve with APG, he says: "Broadly three things we need to it on a daily basis, participants can follow their pensions. In addition, the asset must be adapted to the situation and requirements of the times. The last thirty years have achieved positive investment results despite the crisis, but the question is whether we can continue to do the same. I expect that we should invest directly in the economy, for example in infrastructure, to continue to get the same returns in a responsible manner. Finally APG up the capacity to change, in order to go along with the changes that await us. "
Read the full interview here (in Dutch).
In mid-May were the authors of the pension doc. this month and other decision makers in the pension sector in discussion of the Dutch pension system.
'The toothpaste can not go back in the tube as he is once out', was one of the warnings of the foreign speakers on reforms in the Dutch pension system. Past experiences of Chile and the UK were shared with the Dutch attendees. There were also positive signs, for example, Norman Dreger Mercer indicating that the Dutch pension system scores high in integrity, durability and suitability.'
See here The report in English of the Round Table, written by Sandra Phlippen. In this international Pension doc. Good design can be found on Pension contributions to Solange Berstein of the Inter-American Development Bank, Chris Curry of the Pensions Policy Institute en Norman Dreger of Mercer.
In addition, there are two articles of APG. An article on the six pillar pension Manuel Garcia Huitrón, Alwin Oerlemans and Michiel van Leuven Steijn and an article on the European pension plans Johan Barnard and Wilfried Mulder.
Corien Wortmann, chairman of Stichting Pensioenfonds ABP was last Sunday, along with Anna Grebenchtchikova, chairman of the pension committee of CNV Young and Theo Kocken, Professor of Risk Management at the Free University of Amsterdam, hosted by the discussion program Buitenhof.
The conversation was about the new pension system and the financial situation of pension funds.
Corien Wortmann-Kool said there: "The pension system needs reform, but while the balance is not tipped to entirely individual piggy banks should the pension system should be adjusted so that the lake is based on contributions paid over that 60-year promise of certainty. as we do now. the present system has become priceless 60 years. we see more opportunities to offer that good pension, building on the foundations of the current system. Because that we are among the best in Europe and we can good retirement offer, despite the situation we're in now."
Watch the full here interview.
A recently published study Netspar "Framing and the annuitization decision" shows that six out of ten employees would opt for a lump sum combined with a lower pension instead of the usual fixed equal benefit.
This is the first large Dutch study on the interest in a lump sum, in combination with a lower pension.
The research has been performed by Eduard Ponds (APG and Tilburg University), Onno Steenbeek (APG and Erasmus University) and Joyce Sparks (APG).
More than three thousand active members have questions about the option of a portion of the accrued pension (up 20%) once to record at retirement. The researchers also raise the question of the influence of the question of 'framing' the interest in a lump sum.
Employees who voluntarily retired, often feel happier and healthier after retirement. In particular workers who suffered from a lot of stress experienced life as a pensioner as an improvement.
This concludes researcher Levi van den Bogaard. The sociologist who is affiliated with the University of Amsterdam, studied the influence of retirement on the health and wellbeing of pensioners. "Many people tell themselves that they feel healthier since their retirement," says van den Bogaard.
"When it comes to pensions, it usually revolves around the cost. From this research, you can infer that other things are important. The perceived health benefits at retirement you should take into considerations about the cost of the pension system, "says Van den Bogaard.
Read the thesis here