Communication on pension rights Denmark and the Netherlands

Transcription

1 Communication on pension rights Denmark and the Netherlands Marjolein Quené MA, MBA Sociale Verzekeringsbank (SVB) Communication on pension rights in Europe 25 November 2010 Brussels

2 Various aspects How is the pension system organised? What aspects of communication are required by law? In what way does the information communicated serve socio-political objectives? Is the information communicated based on the right aspects of social reality and the citizen s point of view?

3 The Danish system and the Dutch system Both countries have a three-pillar system In Denmark, more DC than DB in second pillar. In the Netherlands, still a lot of DB, but moving towards more DC A system with more than one pillar is complicated for citizens (several sources)

4 Legal duty to communicate? What is required for the 1st pillar? What does the government prescribe for the 2nd pillar? no legal basis What do citizens derive rights from? How do citizens know they are fulfilling their obligations?

5 Legal obligations concerning communication in the Netherlands 1st pillar: Dutch old age pension (AOW pension): submit claim to SVB at 64-and-a-half years of age 2nd pillar Introductory letter from pension fund when starting a new job Uniform pension statement UPO (every year for participants) UPO for sleepers : once every 5 years on request Indexation in UPO Informed consent of partner at 65: old age or partners pension Pension register as from

6 1st pillar: new developments regarding information Information on pension record on request; statement of insurance Catching up with delay in insurance programme Additional insurance when immigrating or emigrating (Pension Register, starts January 2011)

7 Voorbeeld MijnSVB.nl

8 Pension register as from of the Pension Register Foundation Cooperation between all pension funds and the Social Insurance Bank For the time being, the aim is to provide a complete statement for 1st and 2nd-pillar pensions. No commercial aims Based on UPO Legislative basis: Art. 51 of the Dutch Pension Act No register, but a reference index based on the Dutch personal public service identification number (Citizen Service Number or BSN) DigiD personal access code

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11 Danish case: standardisation and consolidation? What are common assumptions about interest rate, return on investments and inflation? Is there a supervisory body? Will participants i be informed about: 1. Right to value transfer 2. Difference between benefit agreement (DB) and capital agreement and/or available contribution buto agreement? e (DC) 3. Indexation policy of the pension fund and how is this put into practice?

12 Trust Who is responsible for the information provided, and for its standardisation and consolidation? Who supervises this process? Do citizens trust t information they get from non-governmental parties? Isn t the information mainly used by advisors or consultants to sell insurance?

13 The citizen s perspective Pension awareness depends on motivating factor (perception of risk, interest, time scale) and knowledge (e.g. finance). Pension awareness comprises: being up to date with how much pension you will get, how much you will need and whether you can increase your coverage. In the Netherlands, 12% of employees are pension aware, 66% are totally unaware. What are these percentages in Denmark? 25% of the population have logged in. Those with higher levels of education and wages are over- represented. (source: CentiQ, the Pension Awareness Meter, 2009)

14 Risks of simplification It may disguise the changes in legislation in the different pillars Risks related to (non) indexation of the state pension Risks related to reduced scope of the state pension (exclude participants/claimants) Shift from DB to DC? Shift from final wage to average wage? Shift from accrual basis to risk basis?

15 Risks of simplification gives information on consequences of different pension choices open to citizens. But how do different life events affect pensions? - You become unemployed or incapacitated for work - You separate/get divorced - Your partner changes jobs - You start your own business/become selfemployed

16 Social changes in the Netherlands People no longer spend all their working life with one employer: survivor insurance is often insufficient Women are still not economically independent (less than 50%) Divorce or separation: pensions have to be divided. Often not recognised until much later. 1 million one-person businesses: no insurance or insufficient insurance Incapacity for work: often partial (and therefore not insured) Labour participation between 60 and 65 is low, and administrative difficulties discourage working after 65

17 Citizen s perspective: political discussion on social objectives? If the state pension age changes, how does this relate to 2nd-pillar pensions? Do citizens have a false sense of security? - reduction of state pension coverage - changes in 2nd pillar (more DC?) Is there enough coverage for (partial) incapacity for work and death (after moving to a new employer)? What do advisers suggest citizens do? In Denmark much use seems to be made of the 3rd pillar. Do citizens know what their rights and duties are, and which responsibilities belong to their employer and which to them?

18 The citizen s perspective: risky life events First job Getting married Having children Buying a house Changing g jobs Partner changes jobs Starting a business/becoming self-employed Becoming unemployed or incapacitated for work Getting divorced/separating Early retirement Turning 65 Incapacity for work/death of partner in particular are major risks. Citizen must be able to assess pension situation in just one hour a year!!!

19 Conclusion In a three pillar system transparancy is paramount. (Who is responsible for what?) Risk of false sense of safety (Because citizens have no choice in first and second pillar, they think they are protected) Inform citizens also about risks

20 The introductory letter Employer must ensure that employee receives an introductory t letter from the pension fund within 3 months after the pension agreement takes effect. The letter must be clear and concise, and state the following: The employee s rights and obligations Possible options Legal right to value transfer Voluntary (additional) insurance Whether agreement is a benefit agreement (DB) or a capital or contribution agreement (DC). Risks for employee Supplements granted (indexation)

21 The Uniform Pension Statement (UPO) Sent to participants by the pension fund every year. Must contain: Parties concerned, reference date, details relating to employment, salary on which pension contributions are based Old age pension rights accrued (NB contribution agreements) Full amount of old age pension that can be accrued according to the regulations Rights in the event of death Rights in the event of incapacity to work Possible options Supplements granted in the current year and previous year: indexation percentage and price index Value growth in previous year Particulars / special circumstances Conditions / reservations