New rules for pensions
On 30 May 2023, the Senate approved the Future Pensions Act. What awaits you now? When will you hear what the new pension rules mean for you personally and how will we keep you informed? In the coming period, this page will be the central place where you will find the answers to those questions. Even though it is not yet known exactly what the scheme at Philips Pensioenfonds will look like, you will find a lot of information here about what you can expect.
Flash webinar
Watch the flash webinar in which our Pensions Director - Mike Pernot - shared some information about the new legal rules for pensions.
Watch recordingWhat will happen in the near future?
Now that the law has been passed, it is clear that the preparations of your employer, the trade unions and Philips Pensioenfonds have not been in vain. A pension is an employment condition, which means that employers, together with the trade unions, are the first to make pension choices. Philips Pensioenfonds supports them in this and tests the feasibility of the new pension plan. This includes checking whether the new regulation is fair and explainable to all stakeholders. All pensions must be adjusted to the new statutory pension rules by 1 January 2028 at the latest.
What does it mean to you?
Due to the new Future Pensions Act, pensions in the Netherlands will look different. For example, all participants of pension funds receive their own 'pension pot' from which their pension is paid. And the pension will, more than now, move along with the waves of the economy. So changes are coming, but a number of things will remain the same: income will also be arranged for after your retirement, in the event of disability and for any surviving dependents after your death. A frequently asked question from our participants is: “Can my pension pot become empty?” We can be clear about that: no, you will still receive a pension for as long as you live and you don't have to worry about running out of money for your pension. On this page we list a large number of questions and answers. And you read the top 5 questions about the future pension scheme about which there are many misunderstandings.
Information about the new pension rules
The new pension scheme is expected to apply to participants of Philips Pensioenfonds from mid-2026. At that time, it will become clear what the new scheme means for your personal situation. Before that happens, we will keep you informed of the expected timelines and what we already know about the scheme. We do this, among other things, with the questions and answers on this page. But we also work on podcasts, videos and articles in which we always highlight a theme of the new pension rules. We will keep you informed via our digital newsletter Gener@ties and our magazine Generaties and refer you to our new publications.
Questions and answers
In November 2022 we organized a number of flash webinars about the new pension rules from the Future Pensions Act.
All questions asked during these sessions can be found on this page with answers.
Top 5 questions about the future pension scheme
Questions and answers about which there are many misunderstandings
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 think that the pension pot is empty 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 capital becomes available than necessary to supplement the pension capital of participants who live longer. On the other hand, the pension capital is supplemented more than necessary if more participants die than expected. However, this effect is much less than the investment risk that a participant runs. Moreover, the effect on our Fund is relatively limited anyway, because the number of participants who die annually is quite stable due to our size.
Philips Pensioenfonds is in good financial health with a current funding ratio of approximately 122% (as of October 2024). If we assume that the funding ratio will not fall by more than 2 percentage points until the moment of transition to the new pension scheme and we decide to implement the agreements in the transition plan, we can calculate what the agreements in the transition plan are expected to mean for your future pension.
Essentially, that impact is as follows:
- Immediately after we make the switch, every member will have a higher pension than under the existing pension plan.
- All our members are also expected to have a higher pension than under the existing pension plan over the entire period that they draw their pension.
- The so-called solidarity reserve provides pensions that are already being drawn with a high degree of protection against cuts. Pensions that have previously gone up are also strongly protected against cuts. The protection means that it will be less likely than under the existing pension plan that we have to lower the pensions that are being drawn.
- Measured over the long term, the pensions are expected to go up by an average of 2% per year. This means that the pensions are expected to retain at least most of their purchasing power.
This sounds very encouraging. Are there any risks?
Yes, of course this comes with some risks. Developments on the interest and stock markets are unpredictable, and investment yields could fall short of expectations. Inflation could be higher than we currently foresee, which would erode the pensions’ purchasing power over time. These risks already exist under the pension plan that we have now. Under the existing pension plan, the Pension Fund is required to maintain a buffer, which offers members protection in case the investment returns fall short. So how does this work under the new pension plan?
Risks for pension beneficiaries
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.
Risks for active members and non-contributory policyholders
The solidarity reserve does not protect active members and non-contributory policyholders before they start drawing their pension. The new pension plan will not include a financial buffer, meaning that negative investment returns will have a direct negative impact on the personal pension capital of those members, and on their expected pension. At the same time, however, positive investment returns will cause a direct increase in their expected pension. Under the existing system, positive investment yields are generally only used to increase the buffer, and so improve the funding ratio. A member’s pension (actual or expected) only goes up if the Pension Fund can award indexation (including compensatory indexation) on the pensions.
The calculations from the transition plan look positive for all participants. Philips Pensioenfonds is in good financial health with a current funding ratio of approximately 122% (as of October 2024). If we assume that the funding ratio will not fall by more than 2 percentage points until the moment of transition to the new pension scheme and we decide to implement the agreements in the transition plan, we can calculate what the agreements in the transition plan are expected to mean for your future pension.
Essentially, that impact is as follows:
- Immediately after we make the switch, every member will have a higher pension than under the existing pension plan.
- All our members are also expected to have a higher pension than under the existing pension plan over the entire period that they draw their pension.
- The so-called solidarity reserve provides pensions that are already being drawn with a high degree of protection against cuts. Pensions that have previously gone up are also strongly protected against cuts. The protection means that it will be less likely than under the existing pension plan that we have to lower the pensions that are being drawn.
- Measured over the long term, the pensions are expected to go up by an average of 2% per year. This means that the pensions are expected to retain at least most of their purchasing power.
This sounds very encouraging. Are there any risks?
Yes, of course this comes with some risks. Developments on the interest and stock markets are unpredictable, and investment yields could fall short of expectations. Inflation could be higher than we currently foresee, which would erode the pensions’ purchasing power over time. These risks already exist under the pension plan that we have now. Under the existing pension plan, the Pension Fund is required to maintain a buffer, which offers members protection in case the investment returns fall short. So how does this work under the new pension plan?
Risks for pension beneficiaries
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.
Risks for active members and non-contributory policyholders
The solidarity reserve does not protect active members and non-contributory policyholders before they start drawing their pension. The new pension plan will not include a financial buffer, meaning that negative investment returns will have a direct negative impact on the personal pension capital of those members, and on their expected pension. At the same time, however, positive investment returns will cause a direct increase in their expected pension. Under the existing system, positive investment yields are generally only used to increase the buffer, and so improve the funding ratio. A member’s pension (actual or expected) only goes up if the Pension Fund can award indexation (including compensatory indexation) on the pensions.
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.
In short, the compensation comes down to the following:
- This compensation applies to all active members (including disabled participants who have premium-free pension accrual) who are between 40 and 68 years old at the transition moment.
- The intended compensation scheme ensures that the transition effects for active members aged 40 to 68 are more equalised with the surrounding age groups. The compensation scheme is therefore necessary to give a balanced form to the transition to the new pension scheme for all participants.
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?'.
Making choices yourself
Questions and answers
You cannot and do not need to take any action yourself now. It will take some time before it is clear what the new pension scheme will mean for you personally. In this article we explain which steps are being taken and when you can expect personal information.
All pension schemes must comply with the pension rules set out in the Future Pensions Act. Every employer must therefore, in consultation with the trade unions or works council, agree on a pension scheme that complies with this new law.
The accrued pensions will also soon fall under the rules of the new system. In pension jargon, we then speak of 'invaren' (transferring). This decision applies to all accrued pensions in the current system and it is not possible to choose to leave the accrued pension in the current system.
Under the new pension system you will still have the right to ‘value transfer’, i.e. the right to take your pension capital with you if you move to another employer. Because you will accrue a personal pension capital, that means that your own pension savings will go with you to your new employer’s pension administrator, which will then start investing those savings for you.
In the solidarity premium scheme you cannot make your own investment choices. Even though you will have your own pension capital, that capital will still be invested collectively, just as in the present set-up. In other words, the pension fund will invest the total pension capital of all its members together. You will not have the option to choose how it is invested.
No pension plan is ever entirely risk-free: neither the existing pension plan nor the new plan.
With a solidarity-based contribution plan, you will not be able to make any investment decisions of your own. When you retire, by default you will have a variable pension. Even though you will have your own pension capital, that capital will still be invested collectively, just as in the present set-up. In other words, the pension fund will invest the total pension capital of all its members together. You will not have the option to choose how it is invested. You cannot therefore opt for a so-called fixed benefit.
A solidarity-based contribution plan will also include a mandatory solidarity reserve to minimise the likelihood of pension cuts. Of course the possibilities for minimising the need to cut pension benefits will depend on how much money is in the 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.
In the new pension scheme, you can choose to pay (a maximum of) 4% of the pension base in additional pension premiums for additional pension accrual.
In the new pension system, it remains possible to retire earlier or later. In addition, there are similar flexibilisation options, such as a high-low scheme. The Pension Planner will be redesigned at the time the new pension scheme comes into effect. From that moment on, you will be able to make your own calculations for your pension, just like now.
Participants can influence decision-making by applying for membership of the Board of Trustees or the Accountability Body. Our board consists of 3 representatives on behalf of the employees (pension builders) and 2 on behalf of the pension beneficiaries (pension recipients). The Accountability Body, which consists of 6 people, has 4 representatives on behalf of the pension beneficiaries and 1 representative on behalf of the employees. In addition, we regularly ask for the opinion of participants on relevant pension or investment topics, such as, for example, socially responsible investment or risk appetite. Finally, you can always approach the Board with your questions, suggestions and comments via the mailbox of the Board of Trustees (algemeenbestuur.ppf@philips.com).
General questions about the new pension rules
Questions and answers
The Future Pensions Act primarily involves a fundamental overhaul of the pensions that employees accrue with their employers within the Dutch pension system, for example your pension with Philips Pensioenfonds.
The Future Pensions Act provides for two types of pension plan. Employers and unions can agree on one of these options. Under each of those pension plans, you accrue pension savings that are yours alone. In the so-called solidarity contribution plan the pension savings represent a share in a collectively invested pension capital. Besides plans in which you accrue personal pension capital (known as defined contribution plans), other plans currently exist under which members receive a commitment for pension entitlements. At Philips, Signify and Versuni, this is done on the basis of a fixed contribution paid by the companies. If this contribution is sufficient to award the aspired pension accrual, it is granted. If not, the accrual percentage will be reduced.
The solidary-based contribution plan (previously referred to as 'New pension contract') is also a defined contribution plan. Members accrue pension capital as individual savings. Your pension capital is collectively invested in the pension fund, together with the pension capital of other members. Your pension capital consists of a share in that collectively invested capital. The returns generated by the various asset classes are divided among the members, according to their age: following a strong investment year, the pension capital of younger members will grow proportionately more than those of older members, and vice versa after a poor investment year. The thought process behind this setup is that younger members have more time than older members to recover from a poor investment year, and so can afford to take greater investment risks. This is a new type of pension plan, which has no equivalent under the existing pension system.
A key aspect of the Future Pensions Act is a new way of accruing pension rights, and the pension premium that is paid for it. Currently, every employee who earns the same salary accrues the same amount of pension every year, regardless of age. Given that the premiums contributed by younger members will generate returns over a longer period than the premiums of older members, the pension accruals of those younger members are cheaper. This is taken into account at Philips Pensioenfonds and employers also pay less premiums for young people than for older people*. However, this is not the case with a lot of pension funds and the same premium is charged for all members, regardless of their age. Both with Philips Pensioenfonds and with those other funds, the pension accrual is the same for everyone. Given that pension accrual is cheaper for younger members, the Cabinet, employers’ organisations and unions believe that it is fairer for them to pay lower premiums to accrue the same amount of pension with all pension funds (like they do now with Philips Pensioenfonds) - or to accrue more pension for the same premiums, which is the option chosen in the Future Pensions Act. Under the new system, all members of a particular pension plan will have access to the same premiums. Younger members will then accrue more pension, while older members accrue less.
In itself there seems to be something to say that this is fairer than the current system, but this switch does create a transition problem. Existing pension plan participants, and in particular 'middle-aged' participants, will accrue less pension in the future, without having had a higher pension accrual in the past. According to the government and the social partners, this disadvantage must be compensated.
This can involve significant costs. You can find more information about compensation in the question "Will disadvantaged members be compensated?"
* If all the contributions paid by the employers are added up and this total amount is expressed as a percentage of the pension base sum (the pension base is the salary over which pension is built up), this results in 29.4% for the flex scheme. This is the total contribution percentage owed, which can also be found in the pension regulations. This percentage applies for a period agreed between employers and pension fund. Employees pay a personal contribution of 8% (Philips), 2% Versuni or 5% (Signify), which is part of the mentioned 29,4%. Signify employees who fall under the Flex-ES scheme pay 2% of the pension base to the employer.
The accrued pensions will also fall under the rules of the new system. In pension jargon, we then speak of 'invaren' (transferring). This decision applies to all accrued pensions in the current system and it is not possible to choose to leave the accrued pension in the current system.
The memo that Social Affairs and Employment Minister Wouter Koolmees sent to the Dutch House of Representatives on 22 June 2020, setting out the basic outline of the practical details of the National Pension Agreement, contains the following description of the purposes and parameters of a new system:
'In the National Pension Agreement that was adopted in 2019, the following have been agreed as the purposes that the new pension system must fulfil:
- The new pension system must offer a greater probability that pensions will retain their purchasing power. Pensions will be more likely to go up in good years, but more likely to go down in lean times.
- The system must become more transparent and more personalised
- The system must better reflect developments in society and on the labour market.
The National Pension Agreement also contains a series of parameters:
- Retirement pensions must be paid for life.
- The reform should not be used to economise. Sufficient opportunity should exist to realise the current targets for projected pensions.
- The premiums and pension benefits should be as stable as possible.
- The transition should have a balanced impact on everyone involved and across all generations.
- Anyone who is disadvantaged by the transition must be properly compensated.
- Wherever possible, existing pension entitlements and pension benefits must carry over to the new pension contract selected.
- Pension administrators must have sufficient possibilities to record returns on the investments.
- The transition must be practicable and financially viable.'
The new system clearly satisfies a number of these purposes and parameters: for example, it is evident that pensions based on a personal pension capital will be more personalised, and that the new system will lead to greater stability in pension premiums.
However, it is already apparent that the new system will almost definitely not satisfy other points, or not offer any improvement. This applies, for example, to the stability of pension benefits. It is good to know that there are options to limit this risk, such as spreading returns and setting up a solidarity reserve.
The National Pension Agreement led to the Act of Future Pensions that has taken effect on 1 July 2023
Under the new system, each member will have their own personal pension capital. Each member will be able to see what the value of those savings is at any given moment and what factors cause that value to go up (such as the premiums contributed and investment gains) or down (including the benefits withdrawn and investment losses). In that sense, pensions will be transparent under the new system. What will be unclear however is what benefits members should expect to receive in the end from their personal pension capital: those benefits will depend on uncertain future developments, for example what returns the investments will generate. Given that investment returns will have a more immediate impact on the value of individual members’ pensions under the new system, this means less certainty regarding the benefits. In that sense, therefore, pensions will not be any more transparent under the new system.
In short: the new system is more transparent about what is in the personal pension capitals of the members at some point, but not about the level of the pensions to be paid.
The new pension rules are laid down in the Dutch Future of Pensions Act (Wet toekomst pensioenen). These rules are law and they will apply to all pension plans in the Netherlands, and not just Philips Pensioenfonds’s pensions.
The Board must assess in the coming period (2025) whether the new pension scheme is feasible. Although this assessment has yet to take place formally, it seems that the outcome of the assessment is positive and the scheme is feasible.
According to the memo describing the main principles for the practical details of the National Pension Agreement, employers and unions will make arrangements about their new pension plan (flexible premium plan or solidary contribution plan), about proper compensation of active members for a possible disadvantage, about entitlement conversion and about when the new pension system will be adopted. By law, employers are obliged to record all these choices, and the considerations and calculations underlying them, in a transition plan. The pension fund's board will take that transition plan into advisement in its decision on accepting the contract. Pension funds will be obliged to draw up a plan of implementation for the transition, describing what preparations they will make and what actions they will take to administer the new pension plan. The implementation plan must support their ability to administer the new pension plan, bearing in mind a balanced consideration of the interests involved and the laws on equal treatment.
The initiative for making arrangements about the new pension plan, entitlement conversion and compensation of active members formally rests with the employers and the unions. However, it will only be possible to administer that pension plan if the pension fund accepts the contract to administer it. The pension fund's Board of Trustees can only accept that contract if it believes that the interests of all the various groups of members have been given balanced consideration. Given the requirement that the pension fund's board must agree, in practice the employers and unions would do well to involve their pension funds in an early stage of their planning. This is of course also advisable with a view to efficiently drawing on the pension funds’ expertise. Philips, Signify and Versuni have a long-standing tradition of involving Philips Pensioenfonds early on in the development of new pension plans, and is also the case here.
In general, pension funds are required by law to communicate correctly, clearly, timely and balanced. The latter means, among other things, that a complete picture is sketched and, in addition to the advantages of a particular choice, the disadvantages are also highlighted.
Specifically for the transition, pension fund boards must draw up a so-called implementation plan. Part of this is the communication plan, which must be submitted to the AFM for review. This plan will be finalised mid-2025. The communication plan must include, among other things, how the pension fund makes it clear to the participants what consequences the transition has for the amount of the pension. Furthermore, pension accruers and holders of non-contributory policies must gain insight into the amount of the pension they could expect before the switch and the expected pension after the transition. They are informed about this using the so-called navigation metaphor. This navigation metaphor shows the amount of the old-age pension in an expected, pessimistic and optimistic scenario. Retired members are also given insight into the level of pensions before and after the transition. The pension fund also informs all participants about the agreements that have been made about compensation for active members who are disadvantaged by the transition to the new system and the financing thereof.
The situation at Philips Pensioenfonds differs from that of many other funds. Philips Pensioenfonds is a fund with a relatively large number of pension beneficiaries in the population. In addition, the level of the funding ratio, and therefore of the buffer, is generally different for each pension fund. Both points may be important in the discussions (within the Board of the Fund and with Philips, Signify, Versuni and the trade unions) about, among other things, transferring, compensation of pension accruals and the size and method of funding the solidarity reserve. These points have therefore been explicitly included in the agreements made. It is very important to consider all relevant facts and circumstances in their mutual context. Now that the content of the scheme and its financing have been completed, it can be calculated what the scheme is expected to mean for the various groups of participants. These calculations are included in the transition plan of the social partners. The Board of Philips Pensioenfonds also uses calculations to assess whether the new pension scheme is balanced.
If it is decided to transfer the accrued pensions to the new scheme, the members with a paid-up policy will also receive their own pension capital to which the new rules apply. The pension for members with a paid-up policy will then also move more in line with the economy. An important difference with an active member is that no more premiums are paid into the personal pension capital. Members with a paid-up policy will also not receive compensation for the abolition of the current premium-system. This compensation relates to future accrual and these participants no longer accrue pension with Philips Pensioenfonds. If these participants now work elsewhere and accrue pension, they may be entitled to compensation from that employer if they are employed there at the time that employer switches to a pension scheme under the Future Pensions Act.
The transition plan of the social partners includes a pension ambition. This ambition is: at least 70% of the average indexed pension base at the retirement age, with a probability of at least 50%. This target applies to a 25-year-old who accrues a pension in the new pension scheme for his entire working life. This means that the pension is expected to be reasonably comparable on average to that in the current pension scheme.
How much your employer contributes toward your pension is determined in the CLA negotiations between the employers and the unions. That is the rule now, and it will not change under the new pension system. This means that the contributions might go down, but it also means that they could go up.
In the agreements made at Philips, the starting point is that the total premium remains unchanged. However, the personal contribution of Philips employees will be increased from 2% to 8% of the pension base (which will reduce the employer contribution by 6% of the pension base). To compensate for this, the salary scales were increased in October 2024. At Signify and Versuni, the employee contribution has not changed. CAO employees at Signify continue to pay 5% of the pension base and employees of Versuni pay 2% of the pension base.
If you want to take out a mortgage, your financial adviser will ask for data about your current and future income. Your pension information shows not only what your personal pension capital is, but also what your future income will be in a variety of scenarios. Your financial adviser will examine that information and use it to advise you on what mortgage product is the best match for your situation and how much you can borrow.
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.
In the present situation, the assets belong collectively to all the members together. The Board of Trustees manages the collective assets, and makes sure that everything is balanced properly, including all the various interests. You are not entitled to a portion of those assets: instead, you have an entitlement to pension benefits.
The starting point of the new pension system is to make this more personal by giving each participant insight into their own pension capital. This pension capital will continue to be invested collectively.
In the new system, the investment risk lies with the participant. This is in fact already the case in the current scheme of Philips Pensioenfonds. However, in the new system you will see the investment results more directly in your pension pot or in the amount of your benefit. Your pension will move more directly with the economy. This gives you the chance of a higher pension (if investment returns are positive), but you also run the risk of a lower pension (in the event of disappointing investment returns). Your pension will therefore become less certain. Moreover, the pension beneficiaries at Philips Pensioenfonds are protected against disappointing (investment) results 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. The stability of the benefits is also increased by spreading the financial results (both positive and negative) over a number of years.
Timeline
Questions and answers
The pension scheme based on the new law must be arranged by 1 January 2028 at the latest. The aim for the participants of Philips Pensioenfonds is that the new pension scheme will apply from 1 January 2027. So it will take quite a while before you notice anything concrete.
Before Philips Pensioenfonds adopts the future pension plan under the new pension rules, you will receive information explaining what this will mean for you personally. The new pension plan should start applying to you by 1 January 2028 at the latest. Your information will become more and more personalised as the moment of the switch approaches. Until we can tell you how you personally will be affected, however, we will keep you updated about the process and the latest developments regarding the new pension rules. In addition, we can inform you in more general terms about what the new scheme is expected to mean for your future pension. You can read more about this in the edition of Generations that was published at the end of December 2024.
It is vital to take as much care as possible with the new pension rules. The new rules represent one of the most significant changes to the pension system in recent times, and this is a process that should not be rushed.
Your employer and trade unions have made agreements for the period from 1 January 2025 until the introduction of a pension scheme under the new pension system. Only a few adjustments have been agreed for the disability pension.
In this news item you can read all about the decision-making process to arrive at the new pension scheme.
Interest
Questions and answers
How much pension you can draw from your pension capital after you retire will not be predetermined: it depends not only on your pension capital when you retire, but also on interest rates. Interest is a key factor in determining how much money you need in order to draw a lifelong pension. The higher the interest, the more pension your pension capital will provide, and vice versa.
If your pension capital yields more returns than the interest after you retire, it might be possible to raise your pension after you have started drawing it. The opposite is also true, however: if the returns go down, your pension could also be lowered.
Before your retirement, the investment risk will be lowered gradually, and your pension capital will be increasingly invested in safe investments such as government bonds. Those investments provide protection against fluctuating interest rates. This way, as your retirement date comes closer, you will have protection against the risks of purchasing a pension on your retirement date.
Your annual pension benefits will be updated regularly based on the market conditions at the time. Even after you start drawing your pension, interest rates will be a key factor in determining how much you can draw from your personal pension capital.
After your retirement, part of your pension capital will be invested in safe investments such as government bonds. Those investments provide protection against fluctuating interest rates.
The interest rate that will be used for purchasing a pension from your personal pension capital is, as things stand now, a yield curve prescribed by DNB. In the new law, this is referred to as the ‘projected return’: the risk-free interest rate with a margin added or deducted.
If the projected return is higher than the risk-free interest rate, your pension benefits will initially be quite high, but the risk will also be greater that the results will go down. Additionally, if the investments start yielding less, your pension benefits will need to be reduced by more.
If the projected return is lower, your initial pension benefits will also be lower, but you will be more likely to see the returns go up and your benefits increase. Additionally, if the investments start yielding less, moreover, your pension benefits will then not need to be reduced as often or by as much.
The future pension plan will be more personalised, with your own contributions and your own returns that affect your pension capital. The future interest and returns are two uncertain factors under the future pension plan. The system will make allowance for those uncertainties, for example by gradually phasing out the investment risks as your retirement date comes nearer. This offers our members protection against those risks. In addition, 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.
Retiring or being retired
Questions and answers
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).
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 think that the pension pot is empty 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 capital becomes available than necessary to supplement the pension capital of participants who live longer. On the other hand, the pension capital is supplemented more than necessary if more participants die than expected. However, this effect is much less than the investment risk that a participant runs. Moreover, the effect on our Fund is relatively limited anyway, because the number of participants who die annually is quite stable due to our size.
In general, it makes no difference whether you retire (early) just before or just after the transition. In both cases, the new pension rules apply to the new pension accrual from the introduction of the new pension rules. Since the social partners (Philips and trade unions) have requested the Fund to make use of the option of transferring in, the new pension rules will also apply to the pension already accrued and the pension that already started before the transition to the new pension scheme.
Retiring early does mean that you are no longer entitled to the compensation scheme. The following applies to this: the abolition of the current premium-system only applies to future pension accrual. If you retire or leave employment before the transition, there is no more future accrual and therefore no disadvantage for you from the abolition of the current premium-system. As a participant, you are wise to take the compensation into account when deciding on your retirement age or date of retirement. You will only receive compensation if you are accruing a pension with Philips Pensioenfonds at the time of transition.
This works the same as in the current pension scheme: if you retire early, the annual pension amount you receive will be lower. This has two causes. Firstly, your pension accrual will stop earlier, namely at the moment your pension starts. From your retirement onwards, no more pension premiums will be paid into your pension capital. Secondly, your pension will start earlier and therefore have to be paid out for longer. The amount you receive per year will then be lower.
Retiring early does mean that you are no longer entitled to the compensation scheme. The following applies to this: the abolition of the current premium-system only applies to future pension accrual. If you retire or leave employment before the transition, there is no more future accrual and therefore no disadvantage for you from the abolition of the current premium-system. As a participant, you are wise to take the compensation into account when deciding on your retirement age or date of retirement. You will only receive compensation if you are accruing a pension with Philips Pensioenfonds at the time of transition.
Your personal pension capital is invested collectively according to the joint investment policy, just like in the current situation. So you cannot make your own investment choices.
The basic assumption under the new pension system is that your pension capital will continue to be invested after you retire. This arrangement is called a ‘variable pension’. The portion of your pension capital that is still invested will continue to generate returns after you retire, which can be used to raise your pension.
Compensation
Questions and answers
Under the existing pension system, the same amount is contributed for every member. At the employers affiliated with Philips Pensioenfonds, this is almost 30% of the pension base. However, the contributions that are needed for accruing a pension are lower for younger employees, and higher for older employees, since any amount that is contributed for a younger employee will be invested and so yield returns for longer. In concrete terms, this means that the rate of 30% is too much for a younger employee and too little for an older employee. But because the system is based on collective pension arrangements, the extra amount that is contributed for the younger employee now goes toward accruing the older employee’s pension. This is the way almost every pension plan works at the moment. As long as you work, you might pay too much at the start of your career, but later on you will benefit from your then younger colleagues’ contributions. This will change under the new pension rules: the amount contributed to each member’s pension capital will be the same. So current employees that are 'middle aged' have been unable to benefit from the old system, and under the new system the amount contributed to their pensions will be no higher than the contributions for their younger colleagues. For this reason, compensation is being considered for the group that is disadvantaged by the transition to an equal premium for all pension accruors.
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.
In short, the compensation comes down to the following:
- This compensation applies to all active members (including disabled participants who have premium-free pension accrual) who are between 40 and 68 years old at the transition moment.
- The intended compensation scheme ensures that the transition effects for active members aged 40 to 68 are more equalised with the surrounding age groups. The compensation scheme is therefore necessary to give a balanced form to the transition to the new pension scheme for all participants.
Social partners have asked Philips Pensioenfonds to finance the compensation from the fund assets at the transition moment, to the extent that the funding ratio is sufficient (approximately 106% or higher). If the funding ratio is unexpectedly lower, the compensation will be paid in full or in part from the premium budget. If and when that situation occurs, social partners will make additional agreements on the precise details thereof.
Yes, solidarity between younger and older members is expected to still exist in most pension schemes, but less than in the current system. The so-called longevity risk (see question 22) and the death and disability risks continue to be borne jointly.
From now on, however, there is no longer any question of age solidarity with regard to pension accrual. From now on, every participant with the same salary will receive the same premium paid into his pension pot. A young person can accrue more pension with this premium than an older colleague. In the current pension system, both young and old accrue the same pension. In fact, a young person contributes to the pension accrual of his or her older colleague. That is no longer the case in the new pension system.
In the new pension system, the investment return directly benefits the participant through his or her personal pension pot. The pension therefore becomes more personal. More personal means that there is less solidarity on this point as well. And because there is less solidarity, pensions will also move more directly with the economy. Whether or not you see this as a positive development depends on how much you value certainty about your pension benefit. Moreover, the movement of a pension that has commenced with the economy is dampened by spreading financial windfalls and setbacks over 3 years. In fact, this can also be seen as a form of solidarity between generations.
Moreover, the movement of an entered pension with the economy is dampened by spreading financial windfalls and setbacks over 3 years. In fact, this can also be seen as a form of solidarity between generations.
The solidarity between generations is also given shape via the so-called solidarity reserve. The pension recipients at Philips Pension Fund are protected against disappointing (investment) results. This reserve is filled at the start of the new pension scheme from the buffer of the Pension Fund and then by a limited deduction from positive (investment) results of the pension recipients and the other participants from the age of 55. You can receive a supplement to your pension from the solidarity reserve if your pension (without reserve) should be reduced. The condition for this is that there is sufficient capital in the solidarity reserve.
Conversion of pensions
Questions and answers
The pensions of pension beneficiaries, active members and non-contributory policyholders that have already been accrued at the time of the transition to the new system will be converted to the new pension scheme. In pension jargon, we then speak of 'itransferring' ('invaren').
The decision of the pension fund board to transfer is binding for all participants of the fund. There is no individual right of objection. However, the Accountability Body must give advice on transferring.
The ‘allocation key’ or ‘conversion method’ reflects how the Pension Fund’s financial buffer will be shared among each member’s personal pension capital.
In the existing pension system, Philips Pensioenfonds has a realistic ambition: the Pension Fund wants full pension accrual and full indexation for all its members. The realistic ambition was the basis for deciding how to give shape to the new pension plan under the new system and the transition to that new pension plan.
The Pension Fund’s realistic ambition was also the basis for the decisions on the most balanced way of achieving this. With this ambition in mind, it is appropriate and fair to take into account both past indexation arrears and future indexation when allocating the buffer that has been built up under the existing pension system. Ignoring past indexation arrears would impact on older members in particular, while not considering future indexation would disadvantage younger members more.
For the allocation key in the transition plan, it is decided to adopt the ‘50/50’ method. With this method, indexation arrears carry as much weight as future indexation. To avoid confusion: 50/50 does not mean that the share of the Pension Fund’s assets that goes towards indexation arrears is the same as the share going to future indexation. So what does it mean? Each member’s personal pension capital will include an amount for financing a specific percentage (one that is the same for everyone) of the future indexation ambition, plus an amount for financing the same percentage of the indexation arrears (calculated in a uniform manner).
Financing indexation arrears is relatively more costly for older members, who have accrued more pension than younger members. Younger members, however, need relatively more money to realise future indexation than older members do: the future indexation for younger members needs to be financed over a longer time.
No, there are legal calculation rules for the distribution of the pension assets upon commencement. One of the conditions is that participants receive at least the value of the accrued pensions paid into their pension pot, provided that the funding ratio of the Fund is sufficient (more than 100%). The previous question explained how the Fund's buffer is subsequently distributed upon entry.
No. The decision applies to the pensions accrued in the current system of all participants and it is not possible to remain in the current system.
The new pension system must of course be compliant with the relevant laws and regulations. That includes European regulations - and in this case specifically the European Convention on Human Rights and Fundamental Freedoms (ECHR), which states that every person is entitled to the peaceful enjoyment of his or her possessions. At a minimum, this covers the pensions that employees and retired members have previously accrued. EU Member States have the authority to deprive persons of their possessions or to control property if this is required for reasons of public interest. The ECHR lists a series of criteria for determining whether the deprivation of possessions or control of property is legitimate. Ultimately, the European Court of Human Rights will have to decide whether those criteria are satisfied. In the memo that Social Affairs and Employment (that later became the Future Act of Pensions) Minister Wouter Koolmees presented to the Dutch House of Representatives on 22 June 2020, describing the main principles for the practical details of the National Pension Agreement, it is assumed that the likelihood that the European Court will rule, if asked, that these criteria are not met, is small: ’Potential risks of an unjustified infringement of the right to own property will be (...) very minor.’
The calculations from the transition plan look positive for all participants. Philips Pensioenfonds is in good financial health with a current funding ratio of approximately 122% (as of October 2024). If we assume that the funding ratio will not fall by more than 2 percentage points until the moment of transition to the new pension scheme and we decide to implement the agreements in the transition plan, we can calculate what the agreements in the transition plan are expected to mean for your future pension.
Essentially, that impact is as follows:
- Immediately after we make the switch, every member will have a higher pension than under the existing pension plan.
- All our members are also expected to have a higher pension than under the existing pension plan over the entire period that they draw their pension.
- The so-called solidarity reserve provides pensions that are already being drawn with a high degree of protection against cuts. Pensions that have previously gone up are also strongly protected against cuts. The protection means that it will be less likely than under the existing pension plan that we have to lower the pensions that are being drawn.
- Measured over the long term, the pensions are expected to go up by an average of 2% per year. This means that the pensions are expected to retain at least most of their purchasing power.
This sounds very encouraging. Are there any risks?
Yes, of course this comes with some risks. Developments on the interest and stock markets are unpredictable, and investment yields could fall short of expectations. Inflation could be higher than we currently foresee, which would erode the pensions’ purchasing power over time. These risks already exist under the pension plan that we have now. Under the existing pension plan, the Pension Fund is required to maintain a buffer, which offers members protection in case the investment returns fall short. So how does this work under the new pension plan?
Risks for pension beneficiaries
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.
Risks for active members and non-contributory policyholders
The solidarity reserve does not protect active members and non-contributory policyholders before they start drawing their pension. The new pension plan will not include a financial buffer, meaning that negative investment returns will have a direct negative impact on the personal pension capital of those members, and on their expected pension. At the same time, however, positive investment returns will cause a direct increase in their expected pension. Under the existing system, positive investment yields are generally only used to increase the buffer, and so improve the funding ratio. A member’s pension (actual or expected) only goes up if the Pension Fund can award indexation (including compensatory indexation) on the pensions.
No. The available power at the time of entry is available. The companies are not obliged to make additional deposits.
Survivor's pension and disability pension
Questions and answers
If you as an active member die before the retirement date, a lifelong survivor's pension of 35% of the pension base has been arranged for your partner. You no longer accrue a survivor's pension (you do now), as it is a 'risk insurance'. That is why the coverage of the survivor's pension in principle stops when you leave employment. However, the legislator has chosen to continue the coverage for the first 3 months after leaving employment or until the later end of the unemployment benefit period. A participant also has the option to continue the coverage (temporarily) at his own expense under certain conditions.
When you retire, you choose whether you also want to purchase a survivor's pension from your own pension assets. If you choose not to purchase a survivor's pension or at a lower level, your partner must sign for this. If you die before your partner, your surviving partner will not receive a survivor's pension from our Fund.
After your employment ends, your survivor’s pension insurance with your former employer will continue for 3 more months. If you do not enter into a new employment contract, and you are entitled to unemployment benefits, the insurance will continue beyond that. If your unemployment benefits end, or if you do not enter into employment elsewhere for some other reason (for example because you are self-employed), you will be given the option of continuing the survivor’s pension insurance voluntarily. The premiums will be paid from your personal pension capital. You will not have to pay any premiums during the first 3 months, or for as long as you receive unemployment benefits. Incidentally, the continued free coverage of the survivor's pension also applies as long as you receive a ZW benefit.
If your employment ends but you continue the survivor’s pension, it will be based on your salary immediately before your employment ended. As a rule, the insurance will stop after 3 months unless you are still unemployed after that you have the option to (temporarily) remain insured for the survivor's pension on a voluntary basis and at your own expense after the end of the unemployment benefit
As soon as you retire the risk insurance covering the survivor’s pension will stop. You may then decide whether you wish to use your personal pension capital to purchase a survivor’s pension as well. If you decide not to of at a lower level, your partner will need to sign. If you die before your partner, your surviving partner will not receive a survivor's pension from our Fund.
As long as you have an employment contract, your survivor’s pension will automatically be insured. You cannot opt out of this arrangement. This changes when you retire: you may then decide whether you want to use your personal pension capital to also purchase a survivor’s pension. If you decide not to purchase a survivor’s pension or if you choose a survivor's pension at a lower level, you will need your partner’s consent. Instead, your retirement pension will be higher. But if you die before your partner, your surviving partner will not receive a survivor's pension from our Fund.
If you are unable to work due to disability, Philips Pensioenfonds will continue to pay pension premiums. As is the case now, there is also a disability pension scheme that provides a supplement to the WIA benefit of up to 75% of the salary (in the event of full disability).