2015 Pension plan
Lunch & Learn 2 December 2014
What you should
remember
- Valuable pension for
valuable employees
- Less pension accrual
- Get in control
Valuable pension
for valuable employees
Valuable pension for valuable
employees
RBS NL Pension Fund
Dutch pension sector
• Funding ratio 138%
• 107% end of October
• 122% on market rates
• <100% on market rates
• 1,42% indexation 2013
• Often no indexation granted
• Realistic indexation ambition
• In 2013 cuts with 68 funds
averaging 1.9% and
impacting 3.1mln participants
4
Our valuable plan recognised
IPE Awards Vienna
20 November 2014
Financieel Dagblad
27 November 2014
Nominated “Best Pension
Fund of The Netherlands”
FD featured an article on RBS NL
Pension Fund commenting on its
sound policies and continuation of a
classic defined benefit scheme
Trouble in paradise
Trouble in paradise?
Pension funds
Allocation of shortfall
Dutch Government
Budgetary deficits
• 3 children and 2 candies
• Budget deficit
• Excess
savings/insufficient
consumption
• Funding ratio <100%
• 10 rolling average
#children 1,65
• Assumptions on future
availability of candy
Quick fixes pension funds?
Revision of Financial Assessment Framework (FTK)
• Aim to secure nominal pensions
• Higher reserves
• Lower indexation probability
• Balance interests of generations
Nominal
guarantee
Indexation
ambition
Quick fixes government
• Reduction of tax facilities for pension accrual
• Increase of pensionable age to 67 (month following 67th birthday)
• From 86% average career pay to 75%
• Pensionable salary capped at EUR 100k
• Compensation in disposable income
• Jumpstart Dutch economy?
• Net pension arrangement > 100K
What does this mean for you?
What does this mean for you?
Current situation
salary
• Every year you accrue
2,15% pension over your
pensionable salary
Pensionable salary
accrual %
2,15
• In 42 years you accrue
±88% of your career
average pay
What does this mean for you?
New situation
Pensionable salary
accrual %
2,15
salary
salary
Current situation
Pensionable salary
accrual %
2,15
What does this mean for you?
New situation
Current situation
Pensionable salary
salary
salary
€ 100k
Pensionable salary
accrual %
2,15
accrual %
2,15
How do we compensate?
Benefits budget neutral
from unlimited to max. € 100.000
Cost-effective contribution x €1
mln.(% of pension base)
€ 100k
€ 1.9 mln
III
II
I
0.0%
€15.6
€ 2.6
mln
1.875%
Reduction accrual to 1.875% from 2.15%
How do we compensate?
Benefits budget neutral
Compensation for reduction
in accrual %
How do we compensate?
Benefits budget neutral
Compensation for reduction
in accrual %
• Additional pensionable
salary component
Elements pensionable
salary
• Base salary
• 13th month
• 4.2 surcharge
• Holiday allowance
• AMT
• Stand-by allowance
• + 1% contribution
sponsor to employee
benefit budget
How do we compensate?
Benefits budget neutral
Compensation for reduction
in accrual %
• Additional pensionable
salary component
• Increase in base salary
2,75% increase in base
salary
How do we compensate?
Benefits budget neutral
Compensation for reduction
in accrual %
• Additional pensionable
salary component
• Increase in base salary
• Lower offset for state
pension (AOW)
AOW offset reduced from
EUR 13,449 to EUR 12,642
resulting in higher pension
accrual
How do we compensate?
Benefits budget neutral
Compensation for reduction For incomes exceeding
in accrual %
EUR 100k
• Additional pensionable
salary component
• Flat % net pension
allowance
• Increase in base salary
• Net pension arrangement
• Old age pension
• Survivor benefits
Net pension arrangement 100K+
• Full time salaries exceeding 100k receive compensation
• Flat % compensation over excess (±40% in 2014)
• Paid monthly
• Employer will arrange for 3rd party net pension scheme
• Qualifies for pension accrual under Dutch Pension Act
• Non-taxable upon receipt of pension
• Non-taxable in box 3 (wealth tax)
• Individual defined contribution
• Investing in life cycle funds
• Capital serves to purchase an annuity at pensionable age
• Survivor pension covered on basis of opting-out
• Old age pension on basis of opting in
Example: EUR 60k
Accrual
1,875% and
1% BB
2014 costs
2,75%
Salary
increase
Increase
pensionable age
AOW
offset
2015 costs
Example: EUR 110k
Accrual
1,875%
and 1%
BB
2014
costs
2,75%
Salary
increase
Increase
pensionable age
AOW
offset
Salary
cap
EUR
100k
Pension
Allowance
2015
costs
Balanced outcome
• To the extent possible compensated individually
• Lower incomes benefit more from lower AOW offset and accrue only
slightly less in 2015
• Incomes <100k partly compensated by higher accrual in RBS NL
Pension fund and partly in salary
• Income >100k receive flat % over income in excess of salary cap
(annually adjusted)
Get in control!
Get in control!
•
•
•
•
Pension plan with RBS NL Fund remains financially sound
Reduced accrual in RBS NL Fund
Save or consume increase in salary
Possibility of accrual in Net Pension Arrangement for full
time incomes exceeding EUR 100k
• Responsibility for retirement income shifts to you
• Pension accrual/saving/investing or consuming
• Insurance coverage >100k via opting-out
• Mortality risk
• Morbidity risk
What’s next
• Choices > EUR 100k net pension arrangement to be made
in December
• Risk cover via opting-out
• Net pension accrual via opting in
• Via HR Payroll
•
•
•
•
•
Presentation available on website
Action page available on website
Separate sessions with EUR 100k plus earners
Use On Track planning module
Launch get in control campaign 1Q2015
What’s next
• In 3Q14 a wide public debate has been started on the future
of the retirement industry. We are faced with following
challenges:
• Low yield environment
• Retrenching government
• Changing labour market dynamics
• Demographics
• Exploding healthcare costs
• Suitable housing for the elderly
• Intergenerational fairness
• Changes to the pension scheme expected as a result of this
debate but timing yet unknown
Remember
- Valuable pension for
valuable employees
- Reduced accrual in fund
- Get in control of your
future retirement income
- opt-in net pension
- opt-out risk cover