The amount of your pension is not fixed
There may be up to 80 years between the time when you start accruing a pension and the date of your death. Over such a lengthy period, the pension you have accrued is exposed to numerous risks. We mitigate these risks as far as possible by building in buffers and taking precautionary measures.
The following risks are those that affect every pension fund the most:
- Poor investment results: every euro invested has to increase to around 2.5 euros in order that all pensions can be paid today and in the future. This is why we invest. If the return on the investments is poor, this is reflected in the financial position of the fund. We limit this risk by diversifying the investments and hedging certain risks.
- Low interest rates that make pensions more expensive: we calculate how much money is needed to be able to pay all the pensions. This includes pensions today, but also pensions that will be payable in decades to come. The lower that interest rates go, the more money we need to be able to pay all the pensions at a later date. This is also visible in our financial position.
- We are all living longer: the longer we live, the more money the pension fund needs, as we pay pension until death. If all the members in our fund live for longer, we immediately need much more money. Of course we do our best to prepare for this, but life expectancy cannot always be predicted so accurately. This is also visible in our financial position.
- The risk that prices increase, as a result of which your pension will be worth less. The same amount of money will buy less.
More information on the fund’s financial position is available on the website.
How do the risks affect me?
The risk is that the fund will not have a sufficiently healthy financial position, meaning that:
- Your pension will not increase in line with the increase in prices. Your pension will not be indexed, or not fully.
- Your pension will have to be reduced. This is known as curtailment, and happens only if the financial position is not sufficient for a long period.
- Your contribution will have to increase. This is known as a recovery contribution. Your employer will also pay a higher contribution in this case.
- You share these risks with all the other members of the pension fund.
What if things go better or worse than expected?
The website www.mijnpensioenoverzicht.nl presents an estimate of your pension if things go better or worse than expected in the future. You will see an estimate of your total pension, including your AOW pension and various scenario-based amounts. More information on these scenario amounts is provided in the frequently asked questions.
If you have already retired, on www.mijnpensioenoverzicht.nl you can see an estimate of your pension if things go better or worse than expected over the coming 10 years. You can see this estimate from the date on which you receive AOW pension.
What else affects your pension?
There are other factors that affect your pension. The legislation for pensions may change, as a result of which you may be able to accrue more or less pension. Personal choices and events will also affect your pension. For instance, a decision to work less automatically means that you accrue less pension. You should therefore regularly check your pension to see whether you need to take action.
How do we protect the pension fund against risks?
Our Board of Trustees continually monitors the risks to see whether measures are necessary. And if so, what measure would be most appropriate. The Board gives account of this each year in our annual report.
There are various checks in place to ensure that the Board does not miss something. The Board’s decisions are for instance reviewed by the Accountability Body.
Frequently Asked Questions
What do the amounts in the various scenarios mean?
The lowest amount
The lowest amount shown is not an estimate. This is the amount of pension you have accrued up to now. If you stop accruing pension now, this is the gross amount you will receive per year for as long as you live. On mijnpensioenoverzicht.nl, this amount is calculated on the basis that your pension will come into payment at the same time as you start receiving AOW pension.
The expected end result
Above you will see three amounts. These amounts are estimates of the pension you are likely to receive in various situations. One important assumption for all three amounts shown is that you continue to work and accrue pension in your current pension scheme until you start receiving AOW pension. If you stop working earlier, your pension will be lower.
A large number of future scenarios have been considered. One scenario assumes a positive development with respect to interest rates, investment returns and inflation. Another assumes a negative development. All pension funds and insurers use the same future scenarios in their calculations. You see what your pension will be in three situations.
- The expected end result is shown in the middle at the top. This is the pension you are currently expected to receive. At this time, there is a 50% chance that your pension will be lower and a 50% chance that your pension will be higher than the amount shown.
- Under the arrow on the right you see the amount you are likely to receive if the economy does especially well. The chance that you will attain a pension that is higher than the amount shown on the right is currently low (5% of the future scenarios).
- Under the arrow on the left you see the amount you are likely to receive if the economy does much worse than expected. The chance that you will attain a pension that is lower than the amount shown on the left is also currently low (5% of the future scenarios).
What exactly are inflation and purchasing power?
The three possible outcomes take account of inflation. Inflation refers to the situation in which prices of products and services increase. When prices rise, the same amount of money will buy less.
Example: Assume you will receive pension of 100 euros in 10 years’ time and the price of a loaf of bread rises to 2 euros. This means that you will be able to buy less bread with this 100 euros if a loaf of bread now costs 1.50 on average. In 10 years’ time, you will need 100 euros to buy the same amount of bread as you can buy for 75 euros today.
The calculation of the three outcomes takes account of the likelihood that prices of all products and services will rise, as well as the likelihood that your pension will be increased. If things go badly, prices will rise and your pension will not be increased, or only very slightly. If things go well, prices may rise, but your pension will also be increased, so that your pension will keep its value, meaning your pension is 'inflation-proof'.
Under the arrows you see the 75 euros in the example, while you are expected to receive 100 euros. This presentation has been chosen by the government to give you an idea of the purchasing power of your pension.