What is important to know for Hans?

No, you will receive a pension as long as you live. You don't have to worry about running out of money for your pension.

On the retirement date, the annual pension is determined partly on the basis of life expectancy. This concerns the annual pension that a participant receives from his or her own pension capital. You might then expect the pension capital to have run out as soon as a participant has reached that life expectancy. If a participant becomes older than expected, this participant would no longer receive a pension from that moment on. That is of course not the intention.

The Future Pensions Act stipulates that this so-called longevity risk must be covered. This way there is also pension income if one grows older than expected. The remaining pension capitalof participants who die earlier than expected are distributed among the participants who live longer than expected. The supplementation of the pension capital as you become older therefore takes place annually and gradually and not only from the moment you have become older than expected.

This does not mean, however, that a participant does not run any longevity risk at all. If fewer participants die than expected, less pension capital will be available than necessary to supplement the pension capital of participants who live longer. This effect is relatively limited in our Fund, because the number of participants who die each year is fairly stable due to our size. Finally, if not fewer, but more participants die than expected, more pension capital will be available to supplement the pension capital of participants who live longer.

The assumption is that all pensions that have already been accrued will fall under the new rules. This includes pensions of people who are already retired. In pension jargon, this is called ‘entitlement conversion’. However, this basic principle will not necessarily apply if it would create a disproportionate disadvantage for certain groups of members. It is uncertain at this time whether Philips Pensioenfonds will convert the existing pension entitlements: this will be decided further down the road. That decision will essentially apply to the pensions that have been accrued under the existing system by all members. Members will not have a choice between switching to the new pension rules and staying with the existing system.

In the event of entitlement conversion, the expectation is that Philips Pensioenfonds will implement measures to minimise any decrease in benefits from year to year. Nevertheless, it will be impossible to entirely rule out drops, and even small income fluctuations can cause great difficulties for certain groups of members.

It is also possible that participants can still exert influence through a referendum regarding the use of accrued pensions. This is currently being discussed in the House of Representatives (Tweede Kamer).

That is correct. Under the new system, you will have 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. 

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?'. 

In the new pension plan, pension beneficiaries of Philips Pensioenfonds are protected against shortfalls in investment returns by the solidarity reserve. At the time of switching to the new pension plan, that reserve will be filled using the Pension Fund’s buffer. Later, it will be topped up by withholding small amounts from the positive investment yields of the pension beneficiaries and other members aged 55 and up. The solidarity reserve will be used to top up your pension if it would otherwise need to be lowered. However, this is possible only if the solidarity reserve contains enough assets. However, any amount from the pension fund’s assets that is put into the reserve cannot be used for the personal pension savings of members.