What the ABP pension increase means in everyday life
The 12 percent increase in ABP pensions took effect at the beginning of this month. What does that mean for working and retired people? AOb-members? “We have luxury toppings on bread again.”
“For working people, this increase is just as beneficial as it is for retirees,” says AObpolicy advisor Roelf van der Ploeg. “Their future pension will also increase by almost 12 percent.” He is referring to the decision of the Netherlands' largest pension fund to index pensions as of 1 January of this year.
Van der Ploeg explains the choice with a simple example. “Suppose you want to give someone a thousand euros in ten years' time, then you have to set aside a thousand euros for it now, if the interest is 0 percent. If the interest is 10 percent, then setting aside 400 euros is enough. This is comparable to what is now happening with pensions. If the interest rate is 0 percent, then a lot of money is needed for the pensions to be paid out in the future. But if interest rates rise, as they do now, you have to set aside less money to arrive at the same pension amount in decades to come.” (Read more explanation under the three portraits and in this message.)
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'Now I might be able to retire earlier'
Sandra Janssen-Esajas (57), lecturer at Orion College Amstel in Amsterdam
“Actually, I wasn't thinking about my pension at all until my colleague, with whom I worked a lot, retired last year. Suddenly it dawned on me that it wasn't that far away for me either. Now I regularly talk about it with colleagues. Only the young people in particular do not have much interest in the subject. I recognize that in myself from the past. Now that's different and I'm thinking about stopping work and which moment is convenient. On the ABP app I can see exactly what my pension will be in the future. And that doesn't look bad, because I've been building up work and pension since I was eighteen. I now estimate that I will be able to retire in five or six years. Due to the 12 percent increase in ABP pensions, that may even be a few months earlier. Although on the other hand, the ABP age has also been increased by three months, so I don't think it will really make much difference.
'It's not that I don't like my job, but I'm especially looking forward to the freedoms that retirement will bring'
Next year, an appointment with an ABP employee is scheduled to calculate exactly what a convenient moment is. Not that I don't like my job, but I am especially looking forward to the freedoms that retirement will bring. Among other things, the trips that I can plan outside the school holidays. What's tricky about this matter, and why I'm probably putting it off, is that it's hard to predict. Because changes are constantly being made and regulations are being adjusted. Where you used to be able to retire earlier if you wanted to, due to early retirement and pre-pension, this is no longer possible or has become more difficult. And in six years, when I want to retire, it could all be different again. That makes it exciting.”
'I can see that holiday coming again'
Hans Nieuwkerk (71), former teacher at a primary school in Eindhoven
“It became increasingly difficult to make ends meet on our pension. Only the groceries are much more expensive. Well, my wife and I already ate less meat in principle, but lately we have paid extra attention to that. Because we always go to an organic farmer, which is considerably more expensive, and because our budget was less than adequate. In addition, the maintenance of our house turned out to be more difficult to finance, so we were forced to postpone that. I'm still lucky, because I've only been retired for six years. While there has been no indexation for twelve years, which has affected many older ex-colleagues. I count my blessings, so we have this increase nicely. Thanks to the lobby to the politics of the AOb and FNV to lower the funding ratio. If that hadn't happened, we wouldn't have gotten that 12 percent now.
'On the day I was 65,5 years old, my state pension age, my employer said: 'Aju umbrella, you can go!' While I would have liked to continue working as a teacher myself'
My wife also has a pension, built up during her working life as an artist, but that is much lower than my pension. I have worked in education for 39 years. On the day I was 65,5 years old, my state pension age, my employer said: 'Aju umbrella, you can go!' While I would have liked to continue working as a teacher myself. I had a great time with the children, the parents and my colleagues. However, the director did not always find me easy, because I often knew better what was going on in education than she did due to my additional positions within the union. That probably played a part. My pension was a bit disappointing. But with that 12 percent added, I can see that holiday coming again. And we have luxury toppings on bread again.”
'Retirement feels far away for me'
Saskia van Roy (45), geography teacher at Dendron College in Horst
“I don't know much about pensions. But the 12 percent increase for current retirees is, of course, fine. It is in line with current inflation and because pensions have risen less rapidly in recent years, it is more than justified. I also don't think, oh dear, that's going to be deducted from my own future pension. Because in my opinion, at least that is something I have always assumed, my pension will soon be equal to my current salary. I base this on a short calculation of everything I now set aside each month in the form of a pension premium. That is so high that after more than forty years of working in education, in my case, there should be enough left to live well in the future. Assuming I don't live past XNUMX, that is. The intention is that by the time my husband and I retire, our fixed costs will be less, we are very conscious of that. The planning is, for example, that the mortgage is then fully paid off. An older colleague recently helped me out of the dream that my pension will be about the same as my current salary. That was scary, but I haven't figured it out yet. Retirement feels far away for me, but I really need to get into it sometime. I will do that during the holidays, if I have time.
'The intention is that by the time my husband and I retire, our fixed costs will be less, we are very conscious of that'
It is also not a subject that I discuss with my peers. Especially not with my colleagues at school. We do discuss our wage increase and always convert it into McDonald's menus. By comparison, and that's the bitter part, my husband's pay rise is equivalent to menus from star restaurants. I'm afraid that also applies to the difference with my pension."
AObpolicy advisor Roelf van der Ploeg about the pension increase
The increase in pensions is due to the rise in interest rates, as a result of which ABP needs less cash to be able to pay out the pensions. In addition, thanks to a motion passed last year, ABP is temporarily allowed to spend the money earlier. Namely with a funding ratio of 105 percent, where previously it should have been 110. In recent years, ABP was unable to index, which had never happened before in history, because the interest rate was 0 percent and the funding ratio was too low.
Van der Ploeg: “Indexing is an agreement we have made between ourselves. It means that, when there is enough money in cash, the pension amount is indexed by the ABP with the price index. The price index is 11,96 percent, so pensions will also increase by 11,96 percent.”
The pensioners feel this increase directly in their wallets, instead of 100 euros they receive 112 euros per month. For young people, this means that everything that ABP currently pays out in pensions will not remain in the pot. There is a disadvantage for this group, because the larger the pot, the larger the buffer. For the group approaching retirement, the pension increase can be just that push to stop working earlier. Van der Ploeg: “I regularly hear that around me. That the financial consideration to stop working earlier is a very dominant one. How much do I need, many near-retirees are working on that. This increase can make a difference of just four or five months.”
What about the monthly pension premium for working people, will it go up? “The premium will indeed go up slightly, namely 2 percent. This has nothing to do with indexation, but with the expectation of lower returns. The premium increase of 2 percent is paid for a large part, 70 percent, by the employer, so the extra costs for the employee are minimal.”
Also read the message: A pension increase leads to a higher premium