Corporate Pensions: Flexibility

  • A) Mandatory Employee Participation

    This does not regard the question if the company is obligated to participate in a certain plan. It is about the question if an employee has any choice to participate in the corporate pension plan.

    Collective corporate pension plans provide a service at an often attractive rate. Which also means that the company is obligated to have each employee participate.

    So in general an employee will not really have the option whether or not to participate. Only in very specific plans this is possible.

  • B) Old Age Pension Flexibility

    Starting Age Flexibility

    In general it is possible to start the pension pay-out five years sooner or later than the legal retirement age 67.

    High-Low Flexibility

    In general it is possible during the first years of the pay-out to have higher annual terms in the ratio of 100/75. In reality this does not amount to much.

    Additional Premium For Tax Optimization

    Gross wages are in general taxed the moment the employee receives them.

    Pension claims however are in general not taxed during employment and own contributions are in general tax deductible. Thus there can be huge tax and financial benefits for the employee. Advisable to make sure he uses all options to deposit additional pension premium.

    Investment Flexibility

    In case of an investment based old age pension claim, it is highly advisable to make sure the employee has a correct Personal Risk Profile and resulting in the best investment implementation.

    If an employee might have doubts about his Personal Risk Profile, feel free to use our own four page form as included on our website under Brochures/Forms. This profile is too important for an employee to take any risks.

  • C) Next Of Kin Flexibility

    In general this regards a possible option to annually insure an additional gross € 15.500,- until pension age of the partner of the employee.

    International companies often also have an optional Group Risk Coverage which pays-out after an accident and/or disability.

  • D) Disability Pension Flexibility

    Due to the often high annual costs of these kind of coverages, in general there is no additional flexibility within a collective corporate coverage.

  • E) Investment Flexibility

    How to invest

    The most substantial flexibility for an investment based pension claim is if the participant has the option to himself decide how to invest his pension premium. Or if the plan only provides in a choice between certain risk profiles and thus no real choice.

    Life Cycle Funds/General Funds

    Another relevant choice is if the participant can choose between Life Cycle Funds versus General Funds. Life Cycle Funds are mixed funds that in time automatically decrease the investment risk and especially as of age 50-55.

    Tailor-Made Life Cycle Funds

    An additional flexibility is if a plan provides the option that Life Cycle Funds are tailor-made for each specific Personal Risk Profile. For example Defensive/Neutral/Offensive/Very Offensive.

  • F) Pay-out Flexibility

    In The Netherlands there is no real pay-out flexibility. Lump Sum and Flexi Draw Down are not (yet) allowed by law.