What is going to change with the new system?

The new pension system provides a more realistic expectation of your pension. The way you accrue your pension will be clearer and easier to understand, and the new rules will be more in line with changing society, the economy and the labor market. The main changes are:

More transparent and more personal

The new rules for pensions make it easier to understand how much money you are putting into your pension and how fast the amount of your pension is growing. It provides better insight into how much money has been set aside for your retirement. Through your own pension fund or at mijnpensioenoverzicht.nl you can find an overview of your current personal situation and the expected pension (in normal, good or bad weather).

Pension linked to the economy

The money that employers and employees set aside for pensions is invested by the pension funds. In the new system, your pension assets move with the economy. This means that your capital increases when the economy is doing well. But it also decreases when times are tough. A pension fund will soon have various controls to ensure that the pension benefit will remain stable. As participants grow older, their investment risk can be limited. Shocks in financial markets can be mitigated. And setbacks can be (partially) absorbed by a so-called solidarity reserve. This is a kind of piggy bank into which the pension funds put money in times of economic growth, so that they can absorb disappointing results when the economy is less prosperous. In this way, we ensure that the downward movements do not become too great.

Better agreements for occupational groups

In order to ensure that everyone reaches their retirement in a healthy way and that they have a financially sound old age, extra arrangements will be made for some occupational groups in the coming years. For example, by retraining for other work, by taking extra leave or by making other special arrangements to enable people to take early retirement.

One-time payment of 'lump sum'

At the time you retire, you will be given an additional choice. You will be able to choose to withdraw 10 percent of your pension capital in a single payment. We call this a 'lump sum' and this option will probably be offered as early as January 1, 2023. It will not be mandatory to take the lump sum.

From a benefit plan to a contribution scheme

Many pension schemes currently are benefit plans: participants are promised a certain level as to their pension payment. Pension funds invest the amounts paid by the employer and the employee. Their goal is to earn sufficient revenues to pay the pension that was promised. They make use of the market interest to provide for these calculations, which has been very low for years. That means it is sometimes impossible to apply indexation, even though the investment results are good.

In the new scheme the pension schemes are contributions schemes, meaning the contributions are the starting point. Pension funds invest the contributions paid by employers and employees to the best of their abilities. We are heading towards personal pension pots. Your personal pension assets are composed of the total payments made by you and your employer, and the investment results minus the costs. This makes it more clear to you how much money is deposited for you in the large pension pot and how those assets move with the economy and the investment results.

Two types of contribution schemes
The social partners of the pension funds, together with the funds, make their choice between two types of contribution schemes. Both contribution schemes offer pension funds the possibility to decrease the investment risk when people are getting closer to their retirement date. That will prevent too many fluctuations in the expected pension payment for people who are almost retiring. And that the pension payment of pensioners is confronted with major movements.

The two contribution schemes the social partners and funds choose from are:

• Solidarity premium scheme
  is more collective. You still have a collective investment pot and share risks together within the pension fund. The solidarity reserve makes it possible to (partially) absorb certain risks, such as the risk of a reduction in the pension.
• Flexible premium scheme
  is more individual. You have more influence on the investment policy. In this scheme, as a participant, you choose whether you want to invest in a defensive, neutral or offensive way. Other investment choices, such as sustainable investment, are usually choices of the fund in both the flexible and solidarity contribution schemes. These choices are not made by the individual.