A 2020 pension agreement is desperately needed to prevent pension cuts and to reduce the increase in the state pension age. Unfortunately, that hasn’t happened yet. You want to save extra for your pension (self-managed pension is no longer possible), stop working earlier and build up your own pension pot. Are you currently accruing insufficient pension? Building up an additional pension is becoming increasingly important for everyone, because the state pension and the pension through the employer are both under increasing pressure. You can save for an extra pension through an annuity, single premium policy, through bank savings or through an insurer. Anyone who delays this will soon be too late. On June 12, 2020, a pension agreement was concluded between employers, government and employees, what does that mean for your pension?
- Pension agreement June 2020
- Some points from the 2020 pension agreement
- Saving for pension and accruing extra pension, are you accruing sufficient pension?
- AOW gap
- Pension accrual by employer, many pension funds do not reduce or index
- Pension gap means less pension
- Pension and self-management and an extra pension pot through savings or investments
- Bank savings for retirement
- Transfer existing policy
- How much pension have I built up?
- Nominal pension 2020 or fixed pension system as collective pension
- Final pension agreement 2020, are you building up enough pension?
Pension agreement June 2020
In June 2019, it was already agreed to freeze the state pension age at 66 years and four months in 2020 and 2021 and then to increase the age slightly less quickly than previously planned. The higher life expectancy has less of an impact on the increase in the state pension age, but the state pension age will certainly continue to rise. The state pension age has been a bit of an odd one out, because the pensions you accrue are essentially separate from the state pension age. The AOW is a basic pension, the supplementary pension is a supplement to this. The composition of the supplementary pension will also change, but exactly how remains to be worked out. Important changes will be that pensions will be less secure, young people will contribute less to the pensions of the elderly and pensions will become more flexible. A solution will also be devised for the more demanding professions.
Some points from the 2020 pension agreement
The main points of the 2020 agreement are:
- The state pension age is increasing more slowly. The 67 years currently used by the Rutte 3 cabinet for 2021 will not continue. The state pension age for 2020 and 2021 will be frozen at 66 years and four months. The increase in the state pension age will then be more gradual.
- The retirement age is indexed differently, no longer simply on the basis of a longer life expectancy.
- More early retirement schemes are being made possible (for demanding professions, for example).
- The guaranteed pension will be abolished. The premium is determined without you knowing in advance what you will get in return for your pension.
- Your pension becomes more dependent on the results on the stock market. The actuarial interest rate and the coverage ratios will expire. Farances are no longer given.
- The results on the stock exchange will have a greater impact on people who are still building up a pension than on those who are already receiving a pension. Pension reduction is no longer used, but your pension may indeed decrease in the future (also increase, of course).
- In six years, all pension funds will have switched to the new pension system.
Are you already worried about your pension?
Saving for pension and accruing extra pension, are you accruing sufficient pension?
Everyone hopes that when they retire they will have enough money left over to do fun things. Whether this will work depends on your pension and of course also on your future expenses. It makes quite a difference to your expenses whether you want to travel around the world or whether you are really going to take it easier. Whether your house has been paid off or whether the mortgage bill is still wide open. Whether the children have all left home or perhaps are still studying. Moreover, politicians are busy tackling pensions. The aging population would make it all unaffordable. We will receive the first pillar of the pension, the AOW, later and later and perhaps this benefit will also be reduced in the future. Anyone who thought they would receive 70 percent of their last earned wage or average wage will probably end up in a bad situation. The AOW is already not a fat pot and the fat is being removed more and more. And it doesn’t stop there. The state pension age is increasing. More than ever, extra saving for the future, the third pillar of our pension system, is no longer an unnecessary luxury.
Quite a few people have a state pension gap because they lived and worked abroad for a while. You can recently purchase AOW years upon return to our country in order to supplement lost years. Each lost year makes a 2% difference in the AOW benefit. From the age of 17, an employee in the Netherlands builds up 2% per year in AOW pension. In previous years, the accrual and therefore the number of years lost when staying abroad is zero.
Pension accrual by employer, many pension funds do not reduce or index
Take a look at your pension accrual with your employer. It is clear that pension funds are having difficulty maintaining sufficient reserves. The credit crisis and banking crisis have thrown a spanner in the works and probably too much risk has been taken. It looks like there will be new rules for pension funds to invest less risky. The downside of this is that the chance of high returns also decreases, making it even more difficult to grow pension reserves sufficiently. Added to this is the aging population. Benefits will increase, while the overall accrual due to new entrants into a pension fund will decrease. Moreover, it is obvious that if the state pension age is increased, the same will also happen to pensions. An increase in pension contributions will not be considered acceptable and therefore cutting pensions or delaying payment is a relatively simple choice. At least for politicians, because whoever has built up the pension is simply screwed.
Pension gap means less pension
Then there is the pension gap. A pension gap is in fact the gap between what you need to receive 70% of the earned income in the future and what you would now receive based on your state pension and the pension accrued through the employer. The chance of a pension gap has only increased in recent years. There can be many causes of a pension gap and they are individually determined:
- Voluntarily quitting work early.
- Involuntarily stopping work due to incapacity for work.
- No full-time work.
- Change of career or employer.
- Pension accrual with multiple pension insurers.
- Income that does not count towards pension accrual, such as a thirteenth month and company car.
- Be self-employed or self-employed.
- Divorce with consequences for the accrued pension. This can make a big hole in your pension.
Pension and self-management and an extra pension pot through savings or investments
Building up a pension under your own management has no longer been possible for the director/shareholder since July 1, but every private individual can build up an additional pension in 2019 and 2020, for example by purchasing an annuity policy and making maximum use of the tax options. The later you start building up a solid pension, the more difficult and expensive it becomes. And yet there are many options for providing a supplement and there are many authorities that can inform you about this. Think of organizations such as Brand New Day, insurers such as Aegon or the banks. They all have good products. From annuities to bank savings for old age. What you should pay attention to is that you request sufficient quotes and then carefully compare the different offers. After all, no one wants to pay too high costs, but wants a nice extra for later. The competition between the different companies is fierce. So take advantage of this and compare what you can receive as a pension. Always consider whether you want a guaranteed final amount as a pension, or whether you also want to opt for an investment product with varying outcomes. An investment product can provide a much higher return than a savings product, but it can also be very disappointing in the future. Some solutions for an extra pension are:
- Tax Via the FOR . The FOR is the Fiscal Old Age Reserve for entrepreneurs who file income tax returns, such as a sole proprietorship. Through this deferred tax you can reserve 9.44 percent of the profit up to a maximum of 9,218 (2020) as a pension reserve. Only when you retire do you pay tax on the reserves from previous years that you can monetize by purchasing an annuity.
- Annuity policy : if you have a pension gap, you can deduct the premiums from income tax. The payment of the released annuity will soon be taxed, but for most this will be at a lower tax rate than now. This can be arranged with both an insurer and a bank. There are also tax benefits.
- Single premium policy : with a one-off payment you make an investment for an extra pension. With an annuity policy you deposit your premiums periodically, with a single premium policy this is a one-off payment. This can be arranged with both an insurer and a bank.
- Life-course savings scheme : you could save up to a maximum of 12% of your income up to a maximum of 210% of the salary. Here too, the amounts invested are deductible from income tax. You can easily open a life-course savings account with most banks and insurers and benefit from the tax benefits. Unfortunately, this scheme has also been canceled for those who had accrued less than 3,000 euros.
- Salary savings scheme : has unfortunately been cancelled.
- Save or invest yourself .
Bank savings for retirement
With bank savings you save to supplement your pension. Fiscally smart, because if you have accrued too little pension, you can deduct the contribution from your taxes. That makes bank savings very attractive. The costs for bank savings are generally lower than with traditional insurance products. Bank savings is a transparent way of saving for your pension.
Transfer existing policy
For existing policies, only policies for a supplementary pension can be transferred to, for example, Brand New Day. Not the employer’s pension, but what you save through the employer. Self-employed people can also transfer their pension policy to Brand New Day .
How much pension have I built up?
You can check how much pension you have accrued by adding the three components:
- The AOW and pension from the employer with my pension overview via the national pension register and the UPO (Uniform Pension Overview);
- Annuity and the like via your bank statements.
Nominal pension 2020 or fixed pension system as collective pension
With a collective pension system there are two options, a nominal pension (current system) or a fixed pension system. With a fixed pension system, the participants fully bear the risk: things may turn out better than expected, they may turn out to be disappointing. The nominal system aims for annual indexation, but pensions can be reduced if the coverage ratios are insufficient.
Final pension agreement 2020, are you building up enough pension?
Wait until the pension funds start applying a fully developed pension agreement, which could take many years. Funds still have to arrange a lot for this. The AOW may be arranged, but the pensions are not. Building up extra assets, an extra pension pot, it is not a luxury, but something that everyone should work on in order to receive sufficient pension in old age. The best solution for you is determined individually and requires good advice. Don’t wait until it’s too late to build up your own pension.
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