07 oktober 2021 • Gouda • 4 minute read
From 1 January 2023, the new Pensions Act gives companies the choice between offering collective or individual pension accrual for their employees. This freedom presents the pension sector with some major dilemmas, as observed by Frank Schooneveldt and Frank Verkade from IT provider Topicus.
The trend in CBS figures is abundantly clear: we no longer stay loyal to one employer all our lives. Only 1 in 3 employees works with the same boss for 10 years or more. Meanwhile, the trend towards flexitime continues and life expectancy is rising. This calls for drastic changes in our retirement provision. Pensions are currently still largely organised on a collective basis, but more and more workers want to manage their assets for their retirement in their own way. The new Pensions Act, which takes effect no later than 1 January 2023, provides for that transition.
‘Soon they will have to take into account the wishes of each individual, and be able to give full disclosure to each insured person online at any time, similar to an asset manager.’
Frank Schooneveldt Manager Technology and innovation
The aim is for pensions to be more transparent and personalised after the transformation, says Frank Verkade, product developer of Pension & Wealth at IT specialist Topicus. ‘Providers have to choose whether to go for a mainly solidarity-based premium scheme - known as the New Pension Contract or NPC - or to offer a more individual premium scheme - the enhanced premium scheme or WVP+.’
That sounds like a formality but it has big implications. ‘With total invested assets of some 1,700 billion euros, this will be a monster task, where there are also some fundamental choices to be made. Pension funds have to reposition themselves, redistribute all the invested capital over the two premium schemes as well as create fully transparent individual insight.’
According to his colleague Frank Schooneveldt, Manager Technology and Innovation, this is a huge struggle for pension funds and providers. ‘They are very much looking at how to shape this desired flexibility in their offerings. In the current structure, they work with one collective pot of money and one goal: preventing coverage gaps. Soon they will have to take into account the wishes of each individual, and be able to give full disclosure to each insured person online at any time, similar to an asset manager.’
This transparency has a big advantage. As an insured person, you can then see exactly how your pension accrual is doing and whether there is an imminent shortfall, for example. At the same time, this transparency exposes all the cogs behind the pension build-up. Verkade says: ‘In case of an economic downturn, you immediately see your expected benefit decrease. That can cause anxiety. Moreover, it will soon be crystal clear what part of your investment goes on transaction costs, management or solidarity. The increasingly articulate consumer can then quickly deduce: Do I really want that?’
This emphatically raises the question of how much transparency is desired, and whether policyholders will be able to sensibly turn the knobs themselves. Schooneveldt: ‘Personally, we always advocate full transparency. But an intermediate form - where you make fluctuations visible in a limited way - can also be sensible.’ Verkade concurs: ‘Of every hundred people on the street, at most only a few know exactly how their pension will turn out later. It is high time that awareness about pension accrual grows. More transparency is certainly going to help.’
If you will soon be allowed to steer your pension accrual a bit more as an employee, you should also have the right means to influence it, Schooneveldt believes. He sees pension funds already working with projections. "As a participant, you can see more and more clearly which direction the pension build-up will take," he says. Like Verkade, he strives for a single digital dashboard that provides a complete overview of the personal financial situation. ‘With not only the employer pension but also other asset components such as investments and the own home. Like communicating buckets that you can influence, in order to achieve good assets for later.’
‘The NPC doesn't start until 2026, but we are almost ready for that as well.’
Frank Verkade Director Product Management & Delivery at Topicus Pension & Wealth
As a software developer specialising in products for pension funds and asset managers, Topicus already has the technology ready for the upcoming WVP premium scheme. ‘The NPC doesn't start until 2026, but we are almost ready for that as well,’ says Verkade. We can then process and deliver data for more than 300 different parameters, enabling pension funds to inform their policyholders in detail about their personal situation, in real time. From investment and portfolio to value accumulation and expected benefits, also in the longer term. Soon you will even be able to see the sustainability of all funds invested in and easily 'switch off' unsustainable funds. That way, the individual pension, in which the participant is in control, is rapidly approaching. Technically it is possible; the question is what choices the industry will make later on.’
Source: NRC
Visit the website of Topicus Pension & Wealth
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