Who will inherit my personal pension pot? And other questions about the new pension system

The Future Pensions Act regulates that every participant in a pension fund – pensioners and working people – receives a ‘personal pension pot’. Now every pension fund still has one big pot of money. A total of 1500 billion euros will be distributed in 10 million portions. The pension will be paid from that personal pot after the transition to the new system.

An important reason is that the ratio of working people to pensioners is changing. In the 50s of the last century, there were seven working people per pensioner, but in 25 years’ time there will only be two people working per pensioner. In short: we are aging. In order to be able to pay young people a pension in forty years’ time, pension funds will distribute the return on investments differently from now on. If things are going very well on the stock market, young people get more. But if things get worse, they have to absorb the blows. The older the participant gets, the lower the risk that is taken with the accumulated capital. In this way, older people have a high level of certainty about the value of their pension, while young people also have a greater chance of a good pension.

Indexation will disappear, but pensions can be increased much earlier – if the money is there. In the current system, a pension fund has to keep huge reserves in reserve for economic bad times. The so-called coverage ratio must be at least 100 percent in order to be able to pay out all pensions now and in the future. Only at a coverage ratio of 110 percent is there a little indexation. It is a major annoyance for many pensioners: there is enough money in the pension funds, but they don’t get a penny extra. That is changing. With the new law, the majority of the ‘surplus’ can be used for personal pension pots.

That’s for sure. The pension fund’s current buffer can be used to increase pensions. Part of the pension fund’s current surplus will remain in cash as a solidarity reserve, to absorb economic setbacks. Some experts think that pension funds will also be better able to keep up with inflation in the future. That did not work in recent years.

Everything. The pension money is invested in shares and bonds. If the stock market is doing well, the pension pot will grow. But if the economy is down, the balance of the pension pot can also decrease. Of course, this is not an acute problem for young people. They still have a long working life ahead of them.

If all goes well, no. Older workers and pensioners are largely protected from these economic fluctuations. Their pot runs less risk, but also gets less if a very high return has been achieved. If things are really bad on the stock market, there is the solidarity reserve to cushion the blow. Whether the pension increases or not will therefore continue to depend on investments and interest rates, as is the case now.

No. People in their fifties and sixties will receive more than young people. After all, they have been working for much longer and have fewer or no opportunities to grow their personal pot. Pensioners should be given enough to maintain their current pension. After the division, it is – on paper – every man for himself. Young people will no longer contribute to the pensions of the elderly. Or, rather, almost not; Pension funds are allowed to put up to 10 percent of the pension contribution in the solidarity reserve.

That is impossible for anyone to calculate, but it is not now. The calculation is complicated. How long has someone worked? Was parental leave taken or was there a divorce? How many years did a final salary scheme apply? Did someone become incapacitated for work? In short, everything that could possibly have led to other pension entitlements is included. And then a small mistake cannot be ruled out. The pension funds promise to immediately correct errors that are discovered. Tip: compare the new pension overview with last year’s. If all goes well, the accrued pension will be the same or higher.

No. In the pension agreement that employers, trade unions and the government concluded, it has been agreed that going to court is not possible. It is possible to object to the procedure surrounding the transfer. There is some criticism of the new system, especially because participants hardly had a say.

The pension fund. Heirs receive nothing, except for any partner’s and orphan’s pension. So the jar is not that personal. That seems unfair, but when the pensioner reaches the age of 100, he or she still receives a pension benefit. Even if the personal jar is long gone. Then payments will continue to be made from the pension fund’s reserves.

This also exists under the new system, as an insurance, and will not differ much in terms of amounts.

No. The distribution key will not change either. Broadly speaking, one third of the pension premium is paid by the employee and two thirds by the employer.

A target date can be found on the pension fund’s website, but don’t be surprised if it shifts. The transition turns out to be a monster job that literally requires years of preparation. All pension funds should have switched before 1 January 2028, but there are already rumours that this will not be possible.