Why is a good pension insurance important?

A good pension agreement is important as a source of income in case of old age, disablement or for surviving relatives after death. After reaching the retirement age the income is made up of three parts: your old age pension (AOW= Old-age pensions law); the pension from your employer(s); your private arrangement(s). An ideal pension is considered 70% of your last income including your old age pension. You can save for a higher pension income or to repair a pension shortfall using private arrangements. Most employers offer a pension agreement as secondary terms of employment, even if this is not always compulsory. A good pension agreement provides an old-age pension, surviving relatives pension and a disability pension and depends on your personal circumstances and preferences. Koster van Mil & Partners (KMP), the pension advisory body of KOSTER verzekeringen b.v., will be pleased to assist you in assessing your pension agreement.

Am I always entitled to an old-age pension?

In principle every resident of the Netherlands is entitled to an old-age pension when he reaches the age of 65 years. The amount depends on the number of years somebody has been a Dutch citizen and has paid pension premiums. The old-age pension is paid according to a pay-as-you-go system. This means that the premium a person pays today is not a saving for his own pension later, but is paid out to the present generation of people over 65. Heeft u nog vragen over de AOW? Kijk dan of uw vraag beantwoord wordt door de AOW in 10 vragen.

What is the pension deductible?

An AOW deductible is the threshold amount on which no pension is based, because it is assumed that this amount will eventually be paid from the AOW. The law on taxing pensions dictates that a minimum AOW-deductible is included in the pension agreement , because double pension is built up on part of the salary.

How about the disappearance of the partner benefit on pension in 2015?

If you have a younger partner who will be 65 on or after 1 January 2015, you will no longer receive a partner benefit, but only your share of the AOW pension. This may result in your having a lower income (until your partner turns 65) than expected. The government has decided to cancel the partner benefit because this rule is still based on the fact that the husband is the breadwinner. However, an increasing number of wives have their own income. To bridge the gap you can take several measures. Ask KMP what possibilities are available.

What are the pensionable earnings and the pension base?

The pensionable earnings is the part of the salary on which a pension is built up. Usually 12 x the fixed monthly salary is taken plus your holiday allowance. Additional guaranteed components such as a thirteenth month, variable components and income in kind can be included, with the exception of a company car. The pensionable earnings is re-determined every year, usually in January. Of course, deviating conditions such as a different date and/or a different calculation of your pensionable earnings may apply to your pension agreement. Here, we refer to your own pension scheme on your KOSTER Extranet. The pension base is the pensionable salary minus the AOW deductible.

Which pension agreements are possible?

Defined benefit agreement: The amount of the pension payments is agreed upon in advance. Pension in a benefit agreement can be built up on the basis of the last earned income or on the average income. Capital agreement: The pension capital on the final date is guaranteed. On the final date pension payments can be purchased with this capital. Defined contribution agreement: The premium to be paid is fixed in advance.

My pension is built up on the basis of investments. What can I do when the rates fall?

First of all we advise you to fill in an investor profile of the insurer where your pension has been placed to see if the investment selected matches your personal profile. For the selection of the right investment depends on your risk preparedness, your plans for the future and your age. If the investment rates fall, you do not need to spring into action straight away as long as the pension date is still in the distant future. Time plays an important role for the investment risk and compensates any losses today with future gains. The closer you get to your pension date the more important it becomes to protect your assets. You may then change your investment fund and switch to an investment fund with a lower risk level in the short term. With pension policies offering freedom of investment you have the possibility to take over responsibility for your investments and select the composition of your investments yourself from 1 January 2009. This is called opting-out. There is, however, a duty of due care on the part of the pension administrator regarding the spreading of investments as related to the length of the period to the pension date. On the basis of your investor profile the pension administrator checks at least once a year if your investments are within the appropriate limits and advises you accordingly. Do you want to know what type of investor you are? On your KOSTER Extranet you can determine your risk profile online.

In my pension agreement a surviving dependants pension is built up. What does this mean?

The surviving dependants pension is made up of a partner pension and an orphan´s pension. The partner pension is intended for the partner to whom the employee is married or with whom he is cohabitating. Depending on your pension agreement cohabitation can be submitted to a number of conditions. Usually the partner´s pension is set at 70% of the maximum old­age pension and is paid as long as the partner is alive. In modern pension agreements it is usual a surviving dependants pension is insured by means of a life insurance policy. This insurance automatically lapses on the pension date or on the date the employment is terminated.

My partner builds up her own pension. Is it useful to include the partner pension under the policy?

The selection before the pension date: To answer this question you will have to ask yourself the following question: what is your partner´s situation if you would pass away now? When your partner is financially independent and has sufficient means to afford the financial charges, you may consider to build up an old­age pension only. You should realise what the consequences will be for your partner, if your income ceases at the time you die without your having arranged for a partner pension. Our advice is that you make a careful consideration. KMP will be happy to assist you. The selection on the pension date: From 1 January 2002 it is possible to convert your surviving relatives pension for a higher old­age pension on the date you want to retire. The choice for a change depends on the financial situation of yourself and your partner. When you decide to convert the surviving relatives pension in whole or in part, this will carry consequences for the income of your partner after your death. KMP will be happy to advise you. N.B. Partner pension also applies to people living together. From 1 January 2008 it is possible to convert the old­age pension into a partner pension under certain conditions, on the date when the old­age pension commences or when you terminate participation in the pension agreement.

Is it useful to take out a Surviving Dependants Act shortfall insurance?

With a Surviving Dependants Act shortfall insurance you can protect your surviving dependants from a sharp fall in income in the event you unexpectedly die before the age of 65. Subject to certain conditions your surviving relatives will receive a surviving dependants benefit: Your partner was born before 1950 or He/she is work disabled for at least 45% or He/she takes care of one or more unmarried children who are younger than 18 years of age. If your survivors fall outside this group, they will not receive any benefit and the drop in income can be very severe. Should the survivor be entitled to a Surviving Dependants benefit, but have income from (or related to) work , the allowance will be reduced from a certain level. In short, it is not certain that the government will come to the aid of your survivors. The Surviving Dependants benefit will be discontinued when the youngest child turns 18. Before the Surviving Dependants Act came into force, there was the General Widows and Orphans Benefit Act. This arrangement was more generous than the present arrangement and as a result less people are entitled to a (full) Surviving Dependants benefit. With a Surviving Dependants Act shortfall insurance you can make up the difference. The Surviving Dependants Act shortfall insurance can be taken either individually or collectively through your employer. Please contact KMP for personal advice.

What happens to my pension rights when I leave my job or become unemployed?

When the employment agreement is terminated — also in case of dismissal — in principle the pension insurance is made ‘paid-up’. There is no further payment of pension premiums by the employer. Depending on the type of policy you can take your policy with you to your new employer. You may ask KMP if this applies to your policy. If not, there are three possibilities: 1) Value transfer: This is possible if the new employer offers an already collective agreement. The pension rights already built up are transferred to the pension agreement of your new employer. You may contact the insurance intermediary or the pension administrator of your new employer. 2) You can leave the paid up pension rights as they are. If your new employer does not have a collective pension and you are unable to continue your old arrangement on your own, your pension policy will be made paid-up. In order to build up a good old-age provision you can taker out an annuity insurance. In a number of pension agreements it is not unusual for the surviving dependants’ pension to be insured by means of a life assurance policy. Such assurance lapses automatically when the employment is terminated. In such case you can take out a personal Surviving Dependants Act shortfall insurance. Please contact KMP, the pension advisory bureau of KOSTER verzekeringen b.v., and ask for advice: telephone 0172 424244 or e-mail: kmp@koster.nl In the Pensions Act a provision is made for the partner’s pension after participation has been terminated. The partner pension on the basis of risk remains valid if and for as long as there is an unemployment benefit after participation is terminated and in case of unpaid leave during a maximum of eighteen months. 3) Employers and pension administrators are allowed to offer you, after you have left employment, a three years voluntary extension. If you set up as an independent without personnel (ZZP) the maximum term is ten years (deduction is 3 years). Not all pension administrators will offer this. Please contact KMP or consult your pension regulations on your KOSTER Extranet.

Do I build up a pension when I become (partially) work disabled?

In many pension schemes it is arranged that your pension accrual continues normally when you are work disabled. For the share you work you pay the pension premium yourself. For the share you are unable to work you need not pay a premium. It is important for you to check how things stand with the premium waiver in case you become partially unfit for work It happens now and again that there is no waiver if you are unfit for work for less than 50% or 60%. The pension accrual then only applies to the share you work. In most pension schemes it is a rule that your employer or you yourself applies for premium waiver in case of disability to work. If you fail to do so, or you apply too late, this may have negative consequences for your pension regulations, so contact KMP, telephone 0172 424244 or e-mail: kmp@koster.nl

What is a pension shortfall?

A good pension roughly equals 70% of the final wage. With such an ideal pension there is little change in your net income. Your gross income becomes less, but you no longer pay social insurance premiums and the income tax deducted will be less. When at the age of 65 you have built up less than 70%, there is a pension shortfall. To work out your shortfall you have to do a calculation using the expected AOW payment, your pension accrual so far (possibly with previous employers) and what you arrive at with an unmodified continuation of your present pension scheme. KMP may be able to assist you with a pension survey and personal calculation. The causes of a pension shortfall can be: changing jobs divorce part time employment living abroad in the present or the past taking early retirement no or an inadequate pension scheme double-income household.

How can I build up extra pension rights?

You can take care of an additional pension build-up by means of an annuity insurance, by taking part in a pension savings scheme or with the life-course savings scheme. An annuity is a periodic payment normally commencing on your retirement date. Exceptions are possible, but this depends on the type of insurance, your age and the fiscal conditions. If you wish to let your annuity becoming effective on your sixty-first birthday, the payment does not need to be for life, as opposed to a pension, but for a minimum of five years. If you want the annuity to be payable at an earlier age than 65, than this is possible for a lifelong payment of your annuity, on certain condition. When you take it out you can choose between a one-off premium (single premium) or a monthly/annual premium. At the same time please request an offer subject to contract. .

Can my employer observe a waiting period (buffer period) before I start building up a pension?

Yes, for a retirement pension a two-months buffer period may be observed. For a surviving dependants’ pension and a disability pension waiting periods do not apply. Your employer should list you the moment you enter their service.

What happens to my pension rights built up with my previous employer?

As from July 1994 you have a legal right to transfer of value. You can transfer pension rights built up with previous employers to the pension agreement you have with your new employer. To discuss this please contact KMP, telephone 0172 424244 or e-mail: kmp@koster.nl. Would you like to have further information first? Then please read ‘the frequently asked questions about value transfer'. NB: In a transfer of value several parties are involved: the pension administrator of your previous employer, the pension administrator for your new employer, your employer and KMP. The actual transfer of value may therefore take a number of years. KMP will continuously request your new pension administrator to send reminders to the ‘former’ pension administrator. As it is, the pension administrator of your old employer will have to define the value of the pension you have already built up. Let nothing stop you from contacting the former pension administrator. Hopefully this will speed up the transfer.

What does the factor A mean?

The factor A is the growth of pension claims attributable to a calendar year. With a defined contribution scheme the factor A does not allow an insight in the actual growth of the pension. The insurance company where your pension agreement is placed provides you with an annual statement of the factor A. You need the factor A to be able to calculate your annual margin in order to decide on the amount of any annuity premium tax relief.

Can a pension be commuted?

As from 1 January 2007 a pension can be commuted at least two years after leaving the employment involving a pension built up below € 420,69 (2010) per year. It is a matter of a unilateral right on the part of the pension administrator, unless a value transfer is being processed. Accrued benefits also come under this provision. The ex-participant, however, may lodge an objection.

I regularly receive letters from the pension administrator. What should I do with them?

When the Pensions Act came into force, the pension administrator had an obligation imposed to disclose information. Therefore you will regularly receive mail direct from the insurance company where your pension policy is held. In any case you receive an annual Uniform Pension Survey (UPO) including information on the pension agreement and the rights built up. For any questions regarding the contents of the letters from the insurance company you can, of course, contact KMP, telephone 0172 424244 or e-mail: kmp@koster.nl or you may ask your question via your Extranet-P.O. Box. You will always be able to find the letters on your KOSTER Extranet.

What happens if the employer fails to pay the pension premium?

If there is arrears in payment of at least five months, the pension administrator is under obligation, based on the Pensions Act, to inform the employee accordingly. The pension administrator will demand payment from the employer. If within 3 months after the information payments have still not been made, the policy will be made paid-up. If the overdue premiums renders it necessary, the insurer will inform the participants and the employer that the building­up of pension claims is terminated or is cancelled.

I will be pensioned shortly. What possibilities are there for spending my pension capital that becomes available?

If the built-up pension capital becomes available on the retirement date, you should buy a life-long pension payment. You can do that with any insurer you choose. You will then receive a guaranteed life-long payment. The insurer you choose will pay this amount (the pension) to you periodically. The payment should start on the retirement date, but not later than your 70th birthday. However, postponement is only possible if you are in active service or have applied for a part time pension. When buying the pension the interest rate at the time is very important. A low interest rate will offer a considerably lower payment than a high interest rate. If you can choose a flexible date for the start of your pension, you may be able to take this into account. To relate your benefit to your required income you can receive a higher payment during a certain period within the life-long payment period. The relation between the ‘high’ and the ‘low’ payments may, depending on your pension commitment, may not be more than 100:75. In some pension schemes a conversion is possible (you submit surviving dependants pension in exchange for for a higher retirement pension). And maybe you also have policies elsewhere. At the time of payment you may combine such capitals, which may yield a big cost advantage.

Can I use the life-course savings scheme to retire earlier?

Yes, you can use the balance of savings to take up leave prior to your retirement date.

I am an independent entrepreneur (one­man business, general partnership etc.) Can I build up a pension?

No, you have to rely on the annuity insurance as there is no employer/employee relationship.

What type of questions can I present to KMP?

All your questions about your pension scheme. On 1 January 2007 both the new Pension Act and the Financial Supervision Act (Wft) are in force. KMP has a central advisory capacity in both acts. KMP also takes care of the management and the communication regarding the pension scheme, the pension agreement and the implementation agreement. Pension scheme: this contains the rights and duties of the employees and the pension administrator. Pension agreement: here the relationship between the employer and the pension administrator is laid down. Implementation agreement: what the relationship between the pension administrator and the employer is about, is described here. You can contact KMP for any question about your pension agreement or ask a question through the P.O. Box on your own Extranet. Here, you will also find the pension scheme, conditions and possible calculations. Of course, deviating conditions may apply to your pension agreement. Here, we refer you to your own pension scheme on your KOSTER Extranet.

More information

If you have a question not covered here, please contact KMP, telephone 0172 424244 or e-mail: kmp@koster.nl KOSTER verzekeringen b.v. has attuned its service to the Financial Supervision Act, has a permit from the Financial Markets Authority with number 12007436 and is associated with the Financial Services Complaints Tribunal (Kifid) with number 300.004399.