rbs netherlands pension fund
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RBS Netherlands Pension Fund. Lunch & Learn 8 October 2013. Internal use only. Program. Today’s topics. CLA 2013-2015 1 Collectivity and solidarity 2 Pension from 2015 onwards 3 Questions & answers 4. Program. What should you remember?. Ongoing changes, lively debate - PowerPoint PPT PresentationTRANSCRIPT
RBS Netherlands Pension Fund
Lunch & Learn8 October 2013
Internal use only
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2
Program
CLA 2013-2015 1
Collectivity and solidarity 2
Pension from 2015 onwards 3
Questions & answers 4
Today’s topics
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3
Program
1. Ongoing changes, lively debate
– Pensionable age to 67
– Possible further curtailments
2. RBS Pension Fund solid finances
3. Increased necessity for personal financial planning
What should you remember?
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CAO 2013-2015
What is the impact on your pension?
• From 2013 onwards starting date AOW deferred by 1 month
• From 2016 AOW age deferred by 2 months
• In 2019 AOW at 66
• In 2023 AOW at 67
• From 2024 onwards AOW linked to life expectancy
Pensionable age of state pension increases
2013 2016 2019 2023 2024
65 + 1 m 6766+ 2 m
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CLA 2013-2015
What is the impact on your pension?
• “No changes” to accrued rights
• Entrants in the scheme accrue full pension in 42 years
• Flexibility in starting date pension
Pensionable age deferred to 67
40 yrs accrued
~14% at 65
~7% at 66
starter~% at 67
18 year 111
20 year 100
20 yrs accrued
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CLA 2013-2015
What is the impact on chances for indexation?
• Sponsor pays a surcharge for future indexation
• Indexation for deferred participants and pensioners paid from investment returns
• Indexation remains conditional
• De indexation ambition realistic
Change in dexation policy
Generisation effects and advantages of collective DB
Collectivity and solidarity
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Collectivity and solidarity
What is the debate between young and old about?
• What can the older generation still do?
• Moderation of fiscal regime
– From 70% final pay to 70% carreer average pay
• Pensioners have paid for their entitlements?
– # years premium
– Increased life expectancy
• Consequences on income and wealth
• Who is paying AOW/pay as you go scheme?
• Discount factor
• Premium holidays and restitutions to sponsor
• Solidarity
Generation effects
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Collectivity and solidarity
What are the various effects in a collective scheme
• Wealth effect collective versus individual ~6%
• Intergenerational solidarity ~2.4%
– Male to female
– Unhealthy to healthy
– Low to high education
– Young to old
Advantage of a collective pension scheme
Source: Kosten en baten van collectieve pensioensystemen, Red dr S.G. Van der Lecq en dr. O.W. Steenbeek, Kluwer 2006 Hoofdstuk 6
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Collectivity and solidarity
• What are the alternatives?
• Increased transparency of advantages collective schemes
• Defined contribution
– Individual schemes
– Collective schemes
• Private savings
Advantage of a collective pension scheme
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You pension in 2015
What is the problem?
• Shortfall
• Premium
• Contracts incomplete
• Longevity
• Bookkeeping
– Volatility of earnings & balance sheet
– Capital requirements
• Generation-effects
How is your pension going to change?
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Your pension in 2015
Less certain or certainly less
• Nominal garantee
• Purchasing power
How is your pension going to change?
50 premium 100 pensionBonds NL @ 2.5%
50 premium
Bonds
50%
50% equity
@ 2.5%
@ 5%
225?
(E) 140 pension
50?
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Your pension in 2015
What is the purchasing power of your pension?
How is your pension going to change?
0%
20%
40%
60%
80%
100%
2% 100% 67% 45% 30%
3% 100% 55% 31% 17%
4% 100% 46% 21% 10%
CPI 100% 31% 20% 14%
0 20 40 60
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Your pension in 2015
What is the stated ambition for RBS Nederland?
• Nominal premium
• And premium-surcharge for future indexation
How is your pension going to change?
50 premium
(60%)100 pension
Bonds NL @ 2.5%
30 premum
(40%)
Bonds
(10%)
(30%) equities
@ 2.5%
@ 5%
150?
(E) 80 indexation
14?
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Your pension in 2015
Wat is de ambitie voor RBS Nederland?
• Nominal premium
• And surcharge for future indexation
• Existing accrual at 135% cover ratio: 75% bonds and 25% equities
How is your pension going to change?
60%100 pensioen
Obligaties NL @ 2.5%
40%
Bonds
10%
30% zakelijke waarden
@ 2.5%
@ 5%
125?
(E) 70 indexatie
14?
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Cover ratio
18
• Average ~150%
• Worst-case scenario ~110-115%
Nota bene: top-up
payment RBS
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Purchasing power
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• Average ~100%
• Worst-case ~80%
50
60
70
80
90
100
110
120
130
140
150
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Real
fun
din
g r
ati
o
Year
2,5%-percentile
25%-percentile
average
75%-percentile
97,5%-percentile
median
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Your pension in 2015
• How is longevity changing your pension?
• Live expectancy increased 3 month every year over past 10 years
– ~1% impact on cover ratio per year
• Adjustments via cover ratio shifts wealth from young to old
– Old only impacted if fund cuts benefits
• In future changes in life expectancy adjusted yearly
How is your pension going to change?
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Your pension in 2015
• Why are financial institutions changing their retirement schemes?
• ING en Rabobank changed to a CDC scheme
– ABN AMRO and Deutsche Bank are exploring this route
– Achmea will change to CDC
• IFRS and Basel 2/3
– Capital requirements impact core banking model
– Impact both in case of shortfall and excess
• Embedded put option cancelled (i.c. top-up payments in case of shortfall)
– Risk being shifted to participants
– Suitable financial compensation
• Social partners and pension fund should agree on changes
How is your pension going to change?
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Your pension in 2015
• What fiscal changes are expected?
• Per 1 January 2014 pensionable age to 67
• Per 1 januari 2015
– Premium deduction not allowed for salaries > EUR 100.000
– Largest impact on survivor benefits
– Accrual reduced to 70% of career average pay
• Why does the government take these measures?
– Balanced budget through lower amount of deductable premium
– Increased corporate profits due to lower premiums or
– An economic stimulus for increased spending as a result of higher salaries
How is your pension going to change?
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Your pension in 2015
When do we know more?
• Legislation will be send to the lower chamber in December 2013
• Early 2014 legislation to Senate
• Participants’ council will advise and include
– Willingness to take risk
– Willingness to defer pensionable age
– Private savings
• Investment policy
– Ambition
– Funding
– Advice Participants’ council
• CLA adjustments before 1 juli 2014
• New scheme per 1 januari 2015
How is your pension going to change?
Questions
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Summary of RBS Pension Plan
• Career Average Plan:
• - Each year you accrue (per month) a part of your pension over a part of your salary in that year;
• - As a result, your total pension to be accrued is a sum of the annually accrued pension over the years during which you were employed by RBS. So, your pension is indirectly derived from your average salary.
• Indexation over the accrued rights of the participants is conditional. The percentage depends a.o. on the Fund’s financial position. Each year the Board decides on the indexation percentage to be granted (annually as at 1st April). More information canb e found in statement of contingency and indexation label.
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RBS Pension Plan (cont.)
Retirement Pension (RP): the Key Features of Your Plan in 60 Seconds…
• Pensionable salary: See also description in pension plan regulations: 12 times fixed gross monthly salary, holiday allowance, annual bonus plus any salary supplements such as the 4.2% regulation
• AOW offset: threshold amount over which you do not accrue pension. In your pension plan it has been taken in to account that you receive a state benefit (AOW) as of 65 years. That is why you do not accrue pension over your entire salary but over the Pensionable salary -/- AOW(offset).As from 1 January, 2011 the AOW offset is €11,803 (annually adjusted).
• Each year that you accrue pension with RBS you accrue 2.15% over yourpension base (PB) = pensionable salary -/- AOW offset.
• So 40 years x 2.15% of the PB = 86% of the “average PB”.
• Example: PB = € 35,000 start of employment. • 40 years x 2.15% x 35,000 = € 30,100
• (Lifelong gross pension benefit as from 65 years)
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RBS Pension Plan (cont.)
• Partner Pensioen (PP)
• - The pension for your spouse or partner in the event of your death
• - Partner definition is in the pension plan regulations- Partner pension on basis of accrual
• - Level: 70% of projected retirement pension (1.505% of PB) (in the event of death during employment)
• - Level: 70% of accrued retirement pension (in the event of death after termination of employment)
• Orphan’s Pension (OP)
• - The pension for your child(ren) in the event of your death
• - 20% of defined partner pension- For children until 21 years
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RBS Pension Plan (cont.)
• Waiver of premium in the event of occupational disability
- Waiver of premium during term of occupational disability (AO),
- Waiver of premium until ultimately 65 years (or earlier in the event of recovery)
on basis of 75% of the salary applicable at the time the waiver of premium is granted
- Waiver of premium always in proportion to degree of AO, so WIA compliant!
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Example of Career Average Salary:
Example of participant employed as of 25 years:
Salary Offset Pension base
Date of commencement € 50,000 € 11,803 € 38,197
Second year € 51,000 € 12,000 € 39,000
Third year € 52,000 € 12,250 € 39,750
Accrual = pension base x 2.15%
So, if indexation = 1.5% per year
How does this effect the pension accrual?
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Salary -/-
AOW
Pension base:€ 38,197
AOWoffset
Example of pension accrual:
Pensionable salary€ 50,000
Offset:€ 11,803
€ 35.000
€ 15,000
Example off Career Average Salary (cont.)
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pensioenopbouw na 1 jaar
Example Career Average Salary (cont.)
65272625
RP accrual during employment
Total projected = 821 * 40 (years) = 32,849 (total incl. dotted part)
Pension Accrual Year 1Already accrued = 0Accrual after 1 year = 38,197 * 2.15% = 821 (dotted part)
821
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Indexation year 1 RP accrual during employment
Projected accrual = 39,000 x 2.15% x 39 yrs = 32,701 (surplus!)Total projected = 33,534
RP indexation 1
Pension Accrual Year 2:
Indexation year 1 = 821 x 1.5% = 12 (green)Accrued year 1 = 821 (dotted part)
821
Example Career Average salary (cont.)
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65272625
Indexation year 1
Indexation year 2
RP accrual during employment
RP indexation 2
Projected accrual = 39,750 x 2.15% x 38 yrs = 32,476 (surplus!)Total projected = 34,173
RP indexation 1
Pension Accrual Year 3:
Indexation = 1,672 x 1.5% = 25 (white rectangles)Accrual year 1 and 2 (821 + 12 + 838) = 1,672 (dotted part)
Example Career Average salary (cont.)
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RBS Pension Plan (cont.)
Indexation – How Does it Work?
- Accrued pension entitlements to “decrease in value” if they would not be corrected for inflation (always as at 1 April of any year),
- It is the RBS Pension Fund’s ambition to annually grant indexation over the accrued pensions,
- The ambition of the RBS Pension Fund is to grant indexation in line with the Consumer Price Index figure (CPI)
- No UNconditional but CONditional indexation, depending on:
- The financial means available at the RBS Pension Fund
- The Board decision
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Recently Employed by RBS:
As a participant, what should you do?
• HR submits your relevant employment data to Syntrus Achmea,
• Upon receipt of your employment data, Syntrus Achmea sends Welcome Letter
(proof of participation) to your home address within 3 months,
• Individual value transfer: apply within 6 months (forms available at HR).
Syntrus prepares offer without engagement. If you approve, value transfer
process is started provided that funding ratio of new and former pension
administrator > 100%.
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Other Important Pension Events
Important ‘events’ in your work / personal life –
What should you do?
• Cohabitation / Termination of cohabitation
• Marriage / Divorce
• Child birth
• Disability
• Unpaid leave
• Termination of employment
• Retirement
• Death
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Service for Participants:
• ‘Help Desk’ for participants,
• Annual Uniform Pension Statement (UPO),
• Event communication,
• Website with pension information and news,
• Personal portal with downloads and planner,
• Pension consultation hour at RBS
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Where Can I Find relevant Pension Information?
1. Pension Plan Summary available at HR and via website
2. Website www.pensioenfondsRBS.nl - General information on RBS pension plan (both NL and EN) - FAQ - Various downloads - Participant portal and pension planner
3. Specifically on status current participant changes / pension administration: - By mail: [email protected] - By telephone: 0031 (13) 462 3549 (office hours Mon - Fri)
4. Questions on board decision / fund policy: - RBS Pension Office: mail [email protected]