What if conditions are favourable or adverse?
26-05-2020
What could happen to your pension if the economy performs well, or poorly, over a long period of time? From this year, your Uniform Pension Overview (UPO) will include a forecast of your pension benefits under different economic circumstances. This new information is a response to new regulatory requirements for pension administrators such as ING CDC Pensioenfonds. Late last year, the Dutch government's pension website mijnpensioenoverzicht.nl started presenting pension forecasts as well.
Your UPO 2020 shows a forecast of the pension you'll get from ING CDC Pensioenfonds in the event of favourable or adverse economic conditions in the future. The information is shown in a diagram with three arrows that start from a single point. The amount at the bottom of the diagram is not an estimate – it is the amount of pension you’ve built up in the pension fund so far. The three amounts at the top of the diagram are an estimate of the pension you will likely receive in different scenarios. See the example below. The forecast is based on your situation as at 31 December 2019.
The amount at the bottom of the diagram
The amount at the bottom is the pension you’ve built up so far. If you were to stop building up your pension today, this is the amount of pension you would receive annually, on a pre-tax basis, for the rest of your life. The website mijnpensioenoverzicht.nl shows this amount based on the assumption that you will retire from work on the date that your Dutch state pension starts paying out.
The amounts at the top of the diagram
At the top, you’ll see three amounts. These amounts are estimates of the pension you will likely receive in different scenarios. An important assumption for all three amounts is that you will continue working until you reach the pension fund's standard retirement age (67 years of age) and continue to build up your pension under the currently prevailing provisions of the pension plan. If you were to retire early, your pension benefits would be lower.
The supervisory authority has published a set of different future scenarios that the pension fund is required to apply. In one scenario interest rates, return on investment and inflation are favourable. In another scenario, these conditions are adverse. All pension funds and insurance companies are required to make calculations based on the same future scenarios. We have calculated your pension based on these scenarios.
- The expected final result
This is the amount shown at the top centre of the diagram. It is the amount of pension you could reach under current conditions. Based on the different scenarios, there’s a 50% probability that your pension will be lower and a 50% probability that it will be higher than this amount. - If conditions are favourable
The arrow at the right of the diagram shows the amount you could reach if the economy performs well in the future. Based on scenario calculations under current conditions, the likelihood that your pension would be higher than the amount at the right is minimal (5%). - If conditions are adverse
The arrow at the left of the diagram shows the amount you could reach if the economy performs poorer than expected. Based on scenario calculations under current conditions, the likelihood that your pension would be lower than the amount at the left is minimal (5%).
Important note: the amounts shown in the diagram are estimates, based on a set of assumptions (which are required under current regulations). These amounts will be adjusted from year to year following economic developments, modifications in the underlying assumptions, a possible change in your salary, changes in the pension plan, etc. The amounts shown (and the underlying percentages) are estimates - as a participant, you cannot derive any rights from these amounts.