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newsNovember 2019Pension accrual to be cut back in 2020
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Pension accrual to be cut back in 2020

13-11-2019

Interest rates have declined substantially in 2019. As a result, ING CDC Pensioenfonds will cut back the pension accrual by 25.35% in 2020. Low interest rates are making pension accrual a lot more expensive.

ING CDC Pensioenfonds aims to realise pension accrual at the maximum rate allowable under Dutch tax law. Based on the situation as at 30 September, the fund has assessed whether the 31.5% contribution agreed by the social partners will be sufficient to fund this target.

Accrual rate to be cut back by 25.35%
The assessment revealed that the contribution will not be sufficient to fund the maximum pension accrual allowable in 2020. As a result, the accrual rate of pensions will be cut back by 25.35% in 2020. Watch the pension fund's video about the accrual cutback here.

Examples
First of all, take notice of the following:

  • Your pensionable salary comprises 12x your gross personal monthly salary plus holiday allowance, 13th month and any allowances you qualify for.
  • Pensionable salary will be capped at € 107,593 in 2019 (the amount for 2020 is not known yet). You do not build up any pension entitlement for salary you earn in excess of this amount.
  • The minimum amount of your salary that does not accrue pension, is referred to as the threshold for pension accrual (franchise). The amount is
  • Your pension base is equal to your pensionable salary minus the threshold for pension accrual (franchise).
  • In 2020, the aimed accrual rate was 1.780% of the pension base. This will be 1.328%.
  • For more information, visit the website: what is CDC pension and what does CDC pension mean to me.

Sietske
In 2020, Sietske’s pensionable salary is € 50,000. This pensionable salary minus the franchise of € 13,785 is the pensionable base of € 36,215.

The aimed pension accrual at the maximum rate allowable under Dutch tax law was € 645. However, Sietske will accrue € 163 less. In 2020, the pension accrual becomes € 481.

Johan
In 2020, Johan’s pensionable salary is € 75,000. This pensionable salary minus the franchise of € 13,785 is the pensionable base of € 61,215.

The aimed pension accrual at the maximum rate allowable under Dutch tax law was € 1,090. However, Johan will accrue € 276 less. In 2020, the pension accrual will be € 813.

Evelyn
In 2020, Evelyn’s pensionable salary is € 65,000. This pensionable salary minus the franchise of € 13,785 is the pensionable base of € 51,215.

The aimed pension accrual at the maximum rate allowable under Dutch tax law was € 912. However, Evelyn will accrue € 231 less. In 2020, the pension accrual will be € 681.

Rob
In 2020, Rob’s pensionable salary is € 120,000. This is above the maximum so his pensionable salary will be capped at € 107,593. His pensionable salary minus the franchise of € 13,785 is the pensionable base of € 93,808.

The aimed pension accrual at the maximum rate allowable under Dutch tax law was € 1,670. However, Rob will accrue € 423 less. In 2020, the pension accrual will be € 1,247.

Pension accrual after 2020
Based on the situation as at 30 September, ING CDC Pensioenfonds annually reassesses whether the fixed contribution will be sufficient to fund the maximum pension accrual allowable under tax law. The fund will inform you of the outcome. Please note that after 2020 the accrual rate could be cut back again if interest rates remain low.

Indexation of pensions
While the board will not make a formal decision on this matter until January 2020, you should not count on receiving any indexation.

Get a grip on your pension
To find out more about ING CDC Pensioenfonds' financial situation, check the website for news and quarterly updates on funding ratios, investment results and developments in the financial markets.

Would you like to find out how to get a grip on your pension? Log into MijnPensioenoverzicht or the Pension Planner, check whether you pension is on track and find out what you can do to increase your retirement income.

Frequently asked questions

Will the fixed contribution for 2020 be sufficient to prevent a cutback of pension accrual?

On 30 September, the pension fund assessed whether the  fixed contribution would be sufficient to fund the targeted pension accrual. Unfortunately, it won’t be sufficient. The pension accrual will be cut back by 25.35%.

What was the aimed accrual for my pension in 2020?

The pension plan provides for pension accrual at the maximum rate allowable under Dutch tax law. Every year, the pension fund calculates how much that would be. It was 1.771% in 2019 and 1.780% in 2020. This percentage is largely dependent on interest rates.

What will be my old age pension accrual in 2020?

Your old age pension will accrue at a rate of 1.328% instead of the targeted 1.780%.

When will the pension fund announce whether it will be able to grant indexation?

Low interest rates will also have an impact on the indexation of pension accrued in 2019. The board will not make a formal decision on this matter until January 2020. However, you should not count on receiving any indexation.

Could the pension fund change its policy in order to prevent a cutback?

No, it cannot change its policy. The pension fund has no influence on market interest rates. It determines the pension accrual rate for 2020 based on contributions paid into the fund and the cost of pension accrual. The lower the interest rates, the higher the cost of pension accrual.

Could the employer increase its contribution in order to prevent a cutback?

No, it cannot. It has been agreed that the employer pays a fixed contribution into the pension fund. Your employee’s part of this contribution is 7,5% (in 2020). Moreover, the pension plan is a CDC fund, which means its participants bear the risks. In a CDC fund, the employer cannot make additional contributions when the pension fund’s financial situation declines. Conversely, the pension fund cannot return funds to the employer if the fund has a surplus.

How does the pension fund determine whether a cutback will be needed for the coming year?

Every year as at 30 September, the pension fund assesses whether the fixed contribution will be sufficient to cover the pension accrual targeted for the year ahead. Its assessment takes into account the composition of its participant base as well as market interest rates.

Will pension accrued in previous years be cut back?

No, the 25.35% cutback will only apply to pension accrued in 2020.

Will current pension benefits be cut back?

No, only pension accrued in 2020 will be cut back by 25.35%.

What about pension accrued after 2020?

If interest rates stay at extremely low levels over the next few years, pension accrual could be cut back in the years after 2020 as well.

Will I receive a personal message about the cutback?

Every year in early December, you receive a personal letter regarding your pension accrual for the year ahead. This letter is posted in your secure My Pension.

When will I be notified about the indexation?

The board will make a formal decision on this matter in January 2020. You will then receive a personal letter in February regarding the indexation, which will be posted in your secure My Pension.

What can I do to enhance my pension?

Find out how much your pension is worth and take action if your pension isn’t as much as you’d like it to be. Log into ‘Mijn Pensioenoverzicht’ provided by the Dutch government or to the Pension Planner provided by your pension fund.

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