‘With which parameters are pension scheme(s) managed?’
For the aspects of pension management, we will only focus on pillar 2 the employee benefits. There are a number of parameters that can be used to influence the retirement provision. The first are parameters with respect to the pension scheme. Secondly, execution parameters can be used to influence the level of the retirement provision.
Parameters for a pension scheme
The level of a pension depends on a number of parameters. These parameters can be seen as ‘controls’ that can be adjusted, and include:
- Contribution: the amount of paid contribution can vary.
- Benefit: the pension benefit paid to beneficiaries can be higher or lower.
- Accrual: more or less pension can be accrued.
- Retirement date: people can stop working and retire earlier or later.
- Risk: the level of risk that is taken with investing can differ.
- Indexation (target)/ inflation-proof pension. The amount of the indexation that will be paid can vary. The amount of indexation can depend on profit sharing.
- Guarantees: more or less guarantees can be granted.
Pension commitments are agreed between employer and employees. In the Netherlands organizations of employers and sometimes unions make the agreements together with AFM-registered pension advisors.
After the agreement has been made, the contract will be executed by pension institutions, like insurers or pension funds. The pension institutions do have influence on the aspects listed above. All these aspects affect the final pension to be achieved.
Contribution affects the active members. Indexation affects the sleepers and pensioners and possibly the active members. The best interests of all the people involved should be considered in the decision-making.
In principle, an insurer cannot adjust the controls in the interim: an insurer must comply with the conditions in the contract. An insurance contract is agreed for a number of years.
If the insurance contract expires of the legislation changes, the conditions can be adjusted again.
If you think I might be able to help you or your business
Gerrit-Jan Doorneweerd, registered Pension Advisor,
Amsterdam, +31 (0)20 6200825
Mobile, 0651 471 9 – six – five. (Also in the evening or weekend)
Please give me a call