• The intended ambition level of the plan: what retirement income is aspired to?
• The available budget;
• The profile of the ‘new hires’;
• What is the market expected to do?
  The so-called market conformity;
• What is the peer group expected to do?

We monitor developments in relation to this expected market conformity on an ongoing basis and, where possible, with a focus on the peer group.
We do this not only with regard to the fixed available premium percentage intended for building up a retirement pension, but also with regard to the new fixed percentages to be determined to determine the level of the partner’s and orphan’s pension to be insured.
We build our data not only from our clients’ files, but also by interviewing pension administrators on this subject.
And of course we keep you informed where relevant.
Note: do not hesitate to agree on a moment in time to evaluate the chosen fixed percentages.
Are there reasons to adjust?
Undoubtedly needless to say: do not start with percentages that are too high; adjusting downwards is (conditionally) difficult.

Fixed percentage of retirement pension accrual matched to ‘new hires’ profile

The starting point is usually that existing employees should remain entitled to participate in the existing pension plan.
After all, this condition of employment was agreed upon when they were hired, and the new pension legislation offers this possibility.
This is also called respectability.
Many Works Councils take this as their position in their consultations with the employer.
With this in mind, the newly designed pension scheme is in principle intended for new employees who enter employment on/after the date on which this pension scheme enters into force.

Fixed percentage of retirement pension accrual determined and then?

Once the amount of the fixed percentage intended for retirement pension accrual is determined, the following questions arise:

• Which is recommended: respectability of the existing scheme or still harmonization with the newly designed pension scheme?
• And if harmonization is desired, is it feasible and/or realistic?

Harmonization: principles and concerns Below is a brief list of positive points that argue for harmonization:

• The important goal of harmonization is that employees, existing and newly hired, participate in one and the same pension plan.
  From an employment conditions perspective, there is no discrimination.
• Managing one scheme is obviously easier than managing multiple schemes.

However, the road to harmonization is not easy.
In many cases, the existing scheme is of a higher level of ambition than the newly designed scheme.
The consent of the Works Council and/or the affected employees can only be expected if the pension damage (read: the lower employer contribution within the existing scheme compared to the newly designed scheme) is compensated.
A compensation measure can be arranged in various ways and is ultimately the result of mutual consultation and agreement between the employer and the Works Council.
Important points of attention are:

• Does compensation take place in the pension sphere or within the salary sphere?
• In what way are affected employees informed about the content of the compensation measure and the impact on their own pension file and guided in the options (if any) available?
• What key figures are used to determine the pension loss in the first year, but certainly also in the following years?
• What is the duration of the compensation period?
  Is this period temporary, and if so, how temporary?
  Or still until retirement?
• How is the compensation scheme administered in its own systems and who owns it’?

Broadly speaking, the employer’s share of pension costs for “younger” employees will increase.
This will not be recouped by the lower employer’s share of pension costs for ‘older’ employees.
After all, these ‘older’ employees must be compensated for this lower employer share.
In short, harmonizing leads to higher expenses, not only in the first year, but also in subsequent years.

Respectability: principles and concerns

As indicated above, the starting point is usually that existing employees remain entitled to participate in the existing pension plan.
This is an acquired condition of employment upon joining the company and applies until leaving employment.
It also avoids complex consultations about a compensation measure to be drawn up and the predicted higher harmonization costs.
Adding the fact that the law offers this possibility, respectability is obvious.
However, it is hard to accept that young employees within the existing pension scheme will probably receive a lower employer contribution than new employees within the newly designed scheme.
This smacks of unwanted age discrimination and may be difficult to explain to the affected existing young employees.
There are possible measures to counter this uneven playing field.
For example, offering the young employees concerned the opportunity to switch from the existing scheme to the new scheme based on their own choice.
Or by compensating the affected young employees for the difference.
Perhaps needless to say: both scenarios mentioned above lead to higher pension costs for the employer.

Our advice

The law offers the possibility to postpone the “Project Impact Pension Agreement on Own Pension Building.
The end of the transition period is set for Jan. 1, 2028.
But don’t wait that long.
It’s a good idea to get started today.
Get informed about the financial impact of the various Pension Accord scenarios on your own pension file.
Budget for these charges and don’t be surprised!
We will inform you further in subsequent editions of our newsletter.
If you have any questions in the interim, we are of course available for consultation: pensioenvragen@krollerboom.nl.