New rules for pensions

No, you will receive a pension as long as you live. You don't have to worry about that.

At the date of your retirement, your annual pension will be calculated based on your life expectancy. This is the pension that you can draw every year from your own pension capital. This implies that each member’s pension savings will run out as soon as they reach the life expectancy. If they grow older than originally expected, they would stop receiving a pension then, which is of course not the idea.

The National Pension Agreement (Pensioenakkoord) includes arrangements about covering this ‘long life risk’, to provide for a pension income for anyone who passes their life expectancy. The actual pension capital of any member who dies sooner than projected will be divided among members who live longer. This means that additions to your pension capital as you grow older are made annually and gradually, instead of when you pass your projected life expectancy.

It is also important to note that the long life risk will not be covered entirely if fewer members die than projected. However, it is also possible that the ‘solidarity’ or ‘risk-sharing’ reserve will be used to cover the remaining long life risk.
 

Unfortunately, we cannot guarantee that. The value of your pension immediately after the transition to the new pensionsystem is highly dependent on our funding ratio at the time of transition. Of course, this is not yet know at this homent. However, by responsible indexation and by taking less risk in our investment policy, the coming years we try to limit the risk of too low a funding ratio at the time of transition to the new pension system as much as possible. After the introduction of the new pension rules, pension will depend more than now on interest rate developments and investment results. This can of course be positive compared to the current system, but also negative. We will try to prevent a decrease in pension benefits as much as possible. The possibilities we have for this also depend on the decision-making of the social partners (employers and unions) concerning the type of pension rules and its implementation. 

As soon as it is clear exactly how the new Philips, Signify and Versuni pension plans will be structured, we can run calculations to see how high our members may expect their pensions to be at the time of transition. There is a chance that a particular group of members will not gain not as much or lose out (without compensation): mainly active members in the middle age bracket. Members in this group will accrue less pension in the future, without having benefited from a higher pension accrual when they were younger. The premise in the National Pension Agreement is that this group will have to be compensated properly if it is established that they will lose out.

Moreover, it is primarily up to the social partners to determine whether there is a disadvantage that needs to be compensated and, if so, how high the compensation should be. The social partners also decide on the topic of compensation. It is allowed to finance all or part of the compensation from the assets of the pension fund. If the social partners wish employ this possibility, they may ask the management of the Fund for their consent. 

 No, they will not necessarily suffer any disadvantage. Entitlement conversion refers to the basic principle that the new rules will also apply to the accrued pension rights. It is impossible to say precisely how adopting the new system will impact the various groups of members until it becomes clear exactly what shape the pension plan will take at Philips Pensioenfonds and what the rules regarding entry will look like. 

This will hinge on the pension fund's financial position at the time of the transition, but also on other factors, including for example:

• Which of the two regulation possible types is chosen;
• Depending on the choice of plan: how large the solidarity buffer or risk-sharing reserve is and how it is filled (is part of the current buffer used for this?);
• If compensation for middle-aged active members is the case: How much compensation will be needed, and how will it be financed?
• What figure will be used for the projected returns? The projected returns represent the returns that are used at a member's retirement date to estimate the future pension benefits. The lower the projected returns are, the lower the monthly pension will be, and vice versa. You can find more information about the projection yield in the question "Will actuarial interest rates lose their relevance under the new pension system?"

Only once all the details of how the pension plan will work and how it will be financed will we be able to calculate how the pension plan is likely to affect individual members and groups of members.

In the current pension system, younger pension accruors contribute to the pension accrual of their older colleagues. In the new pension scheme, the same premium is available for every pension accruor. Middle-aged pensioners are too young to have benefited maximally from young people contributing part of their pension accrual in the current system and too old to benefit from the equal contribution for everyone in the new system.

That is why members who are now in the middle age bracket and are still accruing a pension with Philips Pensioenfonds might find themselves in a less favourable situation when the new pensionrules are adopted. It will need to be considered whether this group will be disadvantaged, and whether that will then need to be compensated. This will have to be initiated by the employers and unions. 

That is correct. Under the new system, you will accrue a personal pension capital that is invested. The value of your pension capital will fluctuate over time. You will be able to see how much pension capital you have at a particular moment. You will also be able to see what developments have affected it, either increasing its value (contributions and investment gains, for example) or decreasing its value (such as benefits that you have drawn or investment losses). 

How much pension you can draw from your pension capital after you retire will not be predetermined: instead, it will depend on factors such as future investment yields and the interest rates when you retire. Those yields will depend on your age: while you are young, more of your pension capital will be invested in equities (shares) and its value will fluctuate more strongly than when you are older and it is invested more conservatively.

When the new system is introduced, your pension will also be affected more strongly by economic fluctuations: it will be more likely to go up in times of prosperity, but also more likely to go down when the economy is struggling. We will try to prevent a decrease in pension benefits as much as possible. The possibilities we have for this also depend on the decision-making of the employers and unions on the type of contract and its implementation.

With regard to the increase in your pension: in the current pension system, this is always done through indexation. In new pension system your pension will not be indexed in the way that it is now. Whether your pension goes up depends on the amount of your personal pension assets. And also besides the investment return, the projection return will be determining the yearly adjustment of the benefit. More information about the projection return can be found on our Question and Answers page under the question: 'Is the calculation interest rate in the new pension system no longer important at all?'.