The pension reframe

If you live and work in the NL, you probably heard that there’s a major pension law reform upon us.

You might have even received some letters from your pension providers about changes they’re making with your pension money, to comply with the new law.

But do you really know what it means for you specifically?

Chances are you saw the news and the letters, entertained them for a minute, and then filed them away in the trash (or spam box).

If so, I don’t blame you.

Pensions are usually presented as abstract far away numbers, like getting €15,000 or €20,000 a year when you're 68.

It feels small, distant, and hard to care about today.

In this newsletter, I want to give you a completely different frame on your pension, so that you realize you have more agency over it than you think.

What is your total invested personal pension capital so far?

As a result of 14 years working in corporate roles, I currently have pension money spread across three different providers:

1.      Philips Pension Fund

2.      Zwitserleven

3.      Bpf. Detailhandel

I have two simple questions:

·        Over these 14 years, what is the exact total amount deposited into my pension by my employers and by myself?

·        How much has that money grown to be worth today?

Seemingly simple questions. Yet right now, it’s almost impossible to get a clear answer.

Why?

Because two of my pension providers (Philips and Detailhandel) currently operate as Defined Benefit funds.

They collect money, pool it into one massive collective pot, and only report an expected annual payout at retirement, not my personal share of the underlying investment capital.

For example, the Philips Pension Fund portal tells me that my past work has earned me a gross pension payout of €12,921 per year starting at age 68.

That’s helpful to know.

But what I really want to know is the size of the actual investment portfolio sitting behind my pension payout number.

With the new pension law, every pension fund in the Netherlands will finally reveal that exact capital pot for every individual.

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Why is it important to know your total invested personal pension capital?

My three pension providers are telling me this today:

When I look at my hard work through this lens, I may get discouraged and think “pfff, €20k per year is peanuts! Especially if it’s pre-tax!”

And there goes my motivation to understand how my pension is constructed or how I can influence it.

But what if I could see a different picture... something more like this:

Note: For Philips and Detailhandel, the capital values above are estimated approximations since traditional Defined Benefit funds haven't completed their individual capital rollouts yet; Zwitserleven is exact because it is already an individual Defined Contribution fund.

Now it gets interesting.

Seeing that I have €102,000+ invested and compounding in my name carries a different weight than looking at a puny annual pension income of €20k.

This is the first major reframe: Your pension isn't a boring distant promise. It is a substantial investment portfolio in your name, already working for you.

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What do I do with this information?

Say I could go further and audit the performance of my invested pension money:

Note: For Philips and Detailhandel, the values above are made up for illustration purposes, since they have not yet revealed individual investment pots; Zwitserleven is exact because it is already a Defined Contribution pot.

More questions start to pop up, don’t they?

·        Why only 3.1% annualized return over 14 years (when on average the stock market yields 8-10% over the long-run)?

·        Why such different rates of returns per pension providers?

·        What are they each investing my money in to get such different results?

And the ultimate question: Can I choose what my money is invested in, so that I get higher returns?

Here’s the good news: with some pension fund (commercial ones like Zwitserleven, BeFrank, or a.s.r.), you can often already log in today and adjust your investment risk profile!

Under the new law, every provider will give you direct visibility over your personal pension capital pot.

While large sector pension funds (like ABP or Detailhandel) will manage investments collectively using age-based cohort risk models, many corporate and commercial plans are giving people more direct agency over their portfolios than ever before.

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But... I don't know enough about investing to manage my pension pot!

Of course you don’t, how would you?

The vast majority of us busy, successful professionals were never taught how workplace pension structures work.

And if we were living in a world where our money was well taken care of by others, without hidden fees or suboptimal portfolio performance jeopardizing your financial independence, then we’d leave it at that.

But if you're reading this, you already know that being an active steward of your wealth is an essential skill.

If this newsletter made you curious about the actual capital sitting in your pension accounts, that is a already a step forward!

Next, when you’re ready to level up your investing knowledge and confidence to make better informed choices about how your pension pot is invested, let’s talk.

At Amsterdam Financial Coaching we already helped dozens of people take control of their total wealth, pension and other investments, with clarity and confidence.

And we’d be happy to do the same for you.