In addition to our other activities as financial planner, mortgage adviser and asset adviser, we are regularly involved with employers who change pension systems. Our role is in the first instance that we provide explanations. Individual pension advice is sometimes added to this.
We are currently in two stages for a month. Not comparable in terms of industry: a financial institution and an agri-business. But the switch is the same. Many Dutch pensions are based on the idea that an income commitment is made (this is now called a Defined Benefit or DB pension). Dozens of years ago a beautifully conceived phenomenon, but that the interest rate could become negative was not part of that business model. So the DB pension can no longer be afforded by employers. It was then considered that a premium commitment can be made by the employer (that is a Defined Contribution or DC pension). The pension fund / pension insurer does not promise income but helps you to invest your premiums from the employer (and perhaps you save extra within such a scheme) on the basis of a risk profile that you seek out (this is often defensive, neutral or offensive).
The employers we now visit have put a lot of effort into communication; intranet, brochure at home address, company video, etc. Our explanation is the preparation for a choice. It is unbelievable what we encounter. Views that, with all due respect, mainly originate at the coffee machine. A mix from (a) frustrations about that there used to be (!) a non-contributory pension from the age of 65 with a nice early retirement scheme, (b) uncertainties about how a DC pension “works”, and (c) concerns about “that you now bear your own risk”. Put 4 people together and if you’re lucky, two of the opinions look alike. So our first task is to refute confusion, inaccuracies and to interpret concepts and expectations.
The good thing now is that with a good preparation, structure and tools, such one-hour conversation positively surprises people that risk may sometimes give negative results, but the opposite is more likely due to your employer’s growing payments in a DC pension. And that if you analyze risk in terms of capacity and attitude, people who start the conversation very cautiously find out that risk also provides opportunities. Of course we asked whether they answered the questions as if their partner was sitting next to them; sometimes we had to start over!
At the end of every conversation we get a warm hand, a grateful look and the promise that they will make their choice for the risk profile consciously. Our visitors also say that everything has been better than expected. This is why we do what we do. We have a super profession.