Retiring on a pension Version 25.07.2016 Version 25.07.2016
Retiring on a pension Retirement is on the horizon! The rhythm of your life is about to change, and it won t just affect your daily routine. Your finances will be organized differently as well. Instead of a salary, you ll have a state (AOW) pension and a private pension. Before you get to that point, you may have a few important choices to make. This brochure explains the choices you could make when you retire and what you need to know about your monthly pension benefit. In addition to your private pension you ll receive an AOW pension from the Social Insurance Bank when you reach the statutory AOW age. Some aspects of tax and health insurance will also change when you retire and this brochure provides some general information about these changes. Retiring at your AOW age At SABIC, you retire on the date on which you reach the AOW age at the latest and your contract of employment is automatically terminated on that date. The AOW age depends on your date of birth. You ll find a summary of AOW ages later on in this brochure. A few months before your AOW age you ll receive a retirement pension application form from SPF. You ll also receive forms to notify the fund of your choices. Examples of the choices you can make include whether or not to exchange the partner s pension or vary the amount of your pension (more to begin with and then less or vice versa). In the month in which you retire, at the latest, we ll send you an award letter which gives an indication of the pension you ll receive and a statement of your pension situation, based on the information available to SPF. You can expect to receive the first pension benefit at the end of the month in which you retire. If you ve also accrued pension with other pension funds and haven t transferred it to SPF, that pension won t be included in our statement. You can find a full statement of your pension entitlements on the website Mijnpensioenoverzicht [My pension statement]. You won t receive the holiday pay or year-end payment you re used to on top of your monthly pension benefit, as these payments are already included in the calculated monthly pension benefit. We can transfer the pension of retired employees living abroad to a foreign bank account. The benefit is transferred in euros and SPF doesn t charge for this. Banks don t charge for this within Europe, although different rules apply for banks in the rest of the world. SPF pensions are paid on or before the 27th of the month. Click here for the current schedule. Version 25.07.2016 2
Early retirement The earliest you can receive your SPF pension is on your 60th birthday. You can arrange this by applying for your accrued retirement pension to start before your normal retirement date (67 or the AOW age). This is called bringing forward your pension. If you want your retirement pension to start earlier you must apply for this by completing the Retirement pension application form and sending it to SPF between three and six months before you want the pension to start. You can download the form from the SPF website (www.spf-pensioenen.nl). N.B.: If you ve accrued a PPS balance, you can convert it into a PPS benefit which you receive before your retirement pension. This is not discussed in this brochure. For information about this, see the brochure Conversion of PPS balance into a benefit on the SPF website. Of course it s also important that we re notified if you or your partner dies. Indexation Once you've retired, your pension is adjusted in line with cost of living as far as possible. The fund calculates increases on the basis of CBS Statistics Netherlands price index figure CPI all households, derived to ensure that your pension retains its buying power. The payment of these increases, also called indexation, is conditional, which means that the Board of SPF makes a decision every year about whether or not to pay increases on pensions and how much they will be. The decision depends on the financial situation of the fund. If the Board doesn t index pensions in a particular year, there s a chance that you ll receive catch-up increases in subsequent years. There s also a possibility that your pension will be cut. Both of these possibilities depend on the financial position of the fund. If you decide to take your - partial - (pre) pension before reaching the AOW age minus 5 years, then you have to give up your paid work - for a part. Letting us know about changes You may have to contact the pension fund even you retire. If your IBAN (international bank account number) changes, for example, we would of course like to know. If you live abroad you may even need to update us more often. If you move to a different address abroad, we d like to know; and there are other things we d like to know as well. If your marriage, registered partnership or notarial cohabitation contract ends, we need to know. If you live abroad you also need to fill in a form (called a proof of life certificate) every year to let us know that you or your partner are still alive. SPF will send you an automatic reminder about this. Net Pension Scheme If your pensionable salary is higher than 101,519 (threshold in 2016) you can t accrue pension on the amount above that threshold in the basic pension scheme. Members with a pensionable salary above the threshold can join the Net Pension Scheme, which is not compulsory. This brochure only discusses the basic pension scheme. It s important for members of the Net Pension Scheme to know that some of the choices made in the basic scheme also apply to the Net Pension Scheme. If you choose to take early retirement, take a part-time pension, vary the amount of the pension and/or exchange partner s pension in the basic pension scheme, this automatically applies to the Net Pension Scheme as well. Version 25.07.2016 3
Click here for more information about the Net Pension Scheme. Retirement pension The retirement pension is the pension you receive when you retire. The amount of the pension depends partly on the number of membership years, the accrual percentage and the pension base. The pension base is the pensionable salary up to 101,519 (2016), minus the franchise, which is related to the AOW. You don t accrue pension on your full pensionable salary because you ll receive an AOW pension from the government. The choices given below also affect the amount of your pension. Early retirement There are options for taking early retirement. SABIC employees can use the pre-pension saving scheme (PPS) - see the box on the previous page. You can also bring your pension forward. If you take early retirement your pension accrual will stop earlier and your accrued pension will have to be spread over a longer period. This means that the pension will be lower than if you retired at 67 or at the AOW age. retirement traveling, or still have financial obligations, like paying off your mortgage, you can choose to draw a higher retirement pension in the period immediately retirement and a lower pension wards. You can also do the reverse. You can read more about varying the amount of your pension (high/low) in the brochure Varying the retirement pension payment on the SPF website. Exchanging partner s pension for additional retirement pension When you retire you will have accrued both retirement pension and partner s pension. You can choose to use the accrued partner s pension for a higher retirement pension, for example if you don't have a partner or if your partner has a high enough income. However, if your partner hasn t accrued a high enough pension, it s usually advisable to leave the partner s pension as it is. If you have a partner, but you still want to exchange the partner s pension for a higher retirement pension, your partner must agree to this as well, as it means he or she won't receive a partner s pension from SPF your death. Members who exchange the full partner s pension for a higher retirement pension at a pension age of 67 will receive around 23% more retirement pension. You can read more about exchanging partner s pension for additional retirement pension in the brochure Exchanging a partner s pension on the SPF website. Varying the amount of your pension (high/low) You can vary the amount of your retirement pension. If you re planning to spend the first few years of your Version 25.07.2016 4
Part-time pension You can choose to retire part-time, which means you ll work fewer hours in the years leading up to retirement. If you want to retire part-time, discuss the idea with your employer first. It s a good idea to do that at least six months before you want to reduce your hours. If SABIC agrees, the request will be sent to SPF. When you have a part-time pension you accrue less pension because you re drawing a pension benefit while still working some of the time. You still accrue pension on the hours you work, but not on the remainder, so you have a lower retirement pension than if you were working full-time. Partner s pension If you die your pension date, your partner will receive a partner s pension and your children an orphan s pension unless you ve exchanged the partner s pension for a higher retirement pension. The partner s pension is 70% of your retirement pension. If your partner is younger than the AOW age when you die, he or she may also be entitled to a temporary and supplementary partner s pension until the AOW age. The orphan s pension is 14% of your retirement pension. If both parents die, the orphan s pension is 28% for each child. Children receive an orphan s pension until the age of 18, or 27 if they re still in education. AOW The compulsory, group retirement pension that forms the basis for retirement pensions in the Netherlands is laid down in the General Old Age Pensions Act (AOW). Residents of the Netherlands and nonresidents of the Netherlands who have some income here are insured for AOW accrual. In other words, people who live and/or work in the Netherlands. The AOW benefit starts on the date on which a person reaches the AOW age. The applicable AOW age depends on the year and month in which you were born. The table on page 6 shows when your AOW will start. From 1 July 2016, a full AOW benefit will be 763.33 gross a month. If you cohabit with a partner who also receives AOW, you ll jointly receive 1,526.66. As a single person, you ll receive 1,119.24 gross a month. These amounts exclude holiday pay and AOW temporary income support of 25.48 a month. They also assume that you accrue a full AOW. This will be the case if you ve lived and/or worked in the Netherlands continuously for the 50 years preceding your AOW age. A few months before your reach your AOW age, the Social Insurance Bank (SVB) will send you an application form for the AOW. You can find out more about the AOW at www.svb.nl, where you can also find the AOW payment dates. You can read more about the partner s pension in the brochure Partner s and orphan s pension on the SPF website. Version 25.07.2016 5
Be prepared when you retire! When you retire, there are certain things you need to bear in mind to avoid unpleasant surprises. When you re drawing your pension, you won't receive some of the little extras you received before you retired and others will already be incorporated into your benefit. Some things are also organized differently from the way they were organized before you retired. So what do you need to bear in mind? Increases Before you retire, you receive an increase on your accrued pension, equivalent to the general pay increase under the CLA, as long as the fund is in a good enough financial position to pay it. After retirement you receive an annual increase on your pension to compensate for the rise in the cost of living (inflation), as long as the fund is in a good enough financial position to pay it. This gives you a higher pension. Holiday pay After retirement, you no longer receive separate holiday pay, as it s included in the monthly pension benefit. If you used to receive an extra month s pay in November, this will also be incorporated into your monthly pension benefit. Health insurance Health insurance premiums are also paid in a different way. You pay two types of premium under the Health Insurance Act. These are the income-dependent contribution and the nominal premium. We deduct the income-dependent contribution from your pension benefit. You pay the nominal premium to your health insurer. When your employment with SABIC is terminated, the group health insurance for you (and your co-insured family members) also ends. If your employment with SABIC is terminated by retirement or early retirement, you can continue to use the SABIC group health insurance. The same applies to dependents who receive a pension from Pensioenfonds SABIC (SPF). If you want to use the SABIC group health insurance, you re responsible for letting Zilveren Kruis Achmea know. If you're already receiving a benefit from SPF (for example a PPS benefit) when you retire, you don t need to notify Zilveren Kruis Achmea of the change. As a pensioner, early retiree or surviving relative you also receive a discount on the premium for the basic package. You pay another premium for the additional insurance and class cover. For more detailed information about the health insurance, call Zilveren Kruis Achmea (tel: 071-7510051). Besides the nominal premium you also pay an income-dependent contribution of 5.5% (2016) on your pension up to a maximum of 52,763 (2016) for the health insurance. The maximum contribution (2016) is 2,901.97 a year. SPF deducts this contribution from your monthly pension benefit. Version 25.07.2016 6
If your private and AOW pension together are higher than 52,763 (2016), the income-dependent contribution you pay may be too high. That s because a number of different bodies calculate the contribution on your AOW and your pension benefit. If you pay too much, the overpayment will be refunded by the Tax Administration at a later date. Taxation The pension fund deducts tax from your retirement pension. The Social Insurance Bank (SVB) also deducts tax from your AOW. However, neither knows how much the other deducts, so too little tax may be deducted. If you haven t paid enough tax, you ll receive a demand for recovery of underpaid tax from the Tax Administration. If your pension is high, this can soon mount up. An annex to this brochure explains why you might receive a demand for recovery of underpaid tax and how to avoid it. Wage tax when living abroad Wage tax is deducted from the pension benefit. If you live abroad you can apply for an exemption from tax in the Netherlands to avoid paying tax twice: once in the Netherlands and once in your country of residence. You ll find the application form for exemption on the Tax Administration website. Fill in the form and return it to the Tax Administration. If you're entitled to an exemption, the Tax Administration will send the original declaration of exemption to you and a copy to the pension fund. The pension fund will then not deduct wage tax from your pension. The start date of your AOW benefit depends on your date of birth as shown in the table below: AOW-ages You were born: 30 September 1950 1 July 1951 30 June 1951 1 April 1952 31 March 1952 1 January 1953 31 December 1952 1 September 1953 31 August 1953 1 May 1954 30 April 1954 1 January 1955 31 December 1954 You will receive the AOW in: Your age when your AOW benefit starts: 2016 65 + 6 months 2017 65 + 9 months 2018 66 years 2019 66 + 4 months 2020 66 + 8 months 2021 67 years Not yet known: The government will decide at a later date whether to increase the AOW age further for people born 1954. Version 25.07.2016 7
Contact If you have any questions about your pension visit the website: www.spf-pensioenen.nl or contact our Pension Desk: tel. 045-5788100 or email: info.pensioenfondssabic@dsm.com Regulations Read more about retirement pension in the pension regulations by clicking on the icon. Disclaimer The information provided in this brochure by Stichting Pensioenfonds SABIC, based in Sittard (the pension fund) is general, purely indicative and subject to change. It is intended only to provide members with a general view. The information provided is assumed to be reliable, but is used entirely at the user s risk. Neither the administrator (DSM Pension Services B.V.), nor the pension fund accepts any liability for damage arising from errors or omissions in the information, or for damage arising in connection with the use of, reliance on, or distribution of the information. Rights can be derived only from the pension regulations applying to the member. Version 25.07.2016 8
Annex: Information about demands for recovery of underpaid tax When might you receive a demand for recovery of underpaid tax? The SPF Pension Desk often receives calls from pensioners asking about demands for recovery of underpaid income tax. Why do people receive them? The most common reaction from callers is but isn t wage tax deducted from the monthly benefit? Below we explain when you might be liable for recovery of underpaid income tax even though wage tax has been deducted from your pension. There are four key terms here: wage tax, wage tax-exempt allowance, income tax return and progressive tax system. Wage tax This is the tax deducted from your salary or benefit. Wage tax-exempt allowance This is the tax-exempt allowance for the wage tax to be paid (the part of your income on which you pay no tax). Income tax return This is used to declare and check the total wage tax paid. Progressive tax system The higher your income, the higher the percentage of tax. The tax percentages for different tax bands in 2016 are shown in the table on the next page. If you decide to start drawing your SPF pension before your AOW age, you pay tax at a higher rate up to the AOW age than you do it. This means that, for the same gross pension, the net part remaining deductions is higher the AOW age. Wage tax doesn t take account of personal circumstances, but does take account of income tax. When you complete your income tax return, you must state your total income in a particular year. As the Netherlands has a progressive tax system this may mean you ve paid too little tax every year. This is explained in the example of the recovery of underpaid tax given below. Avoiding recovery of underpaid tax How can you avoid recovery of underpaid tax? If the underpaid tax is higher or almost the same as the annual general tax-exempt allowance (this depends on your income) you could consider asking the benefit agencies not to apply the tax-exempt allowance. In most cases it is applied by the government s benefit agency, so you can ask the SVB not to apply the allowance. The SVB has a handy help page on its website which gives advice about whether or not the tax-exempt allowance should be applied. The help page gives guidance rather than a definitive answer. It bases the information only on a single company pension benefit and 100% AOW. Click here for the address of the help page. You can also ask SPF to deduct more wage tax every month by sending a written request to SPF, Postbus 6500, 6401 JH Heerlen, or an email to info.pensioenfondssabic@dsm.com. SPF can t calculate the amount of the adjustment to your wage tax. You must calculate this yourself (with the assistance of your financial adviser, perhaps) and notify SPF in writing. Another possibility for avoiding recovery of underpaid tax is to submit a provisional declaration to the tax administration so that it can allow for the deduction of too little tax from your pension benefit. Minimum of two income sources As a pensioner or dependent you often receive two or more benefits, for example a benefit from the government alongside a pension from SPF (and perhaps from other funds). When calculating wage tax, the fact that you have several sources of income is not taken into account. Every benefit agency, and that includes SPF, calculates wage tax separately on the basis of the tax tables. Version 25.07.2016 9
Band Income * born before 1946: 34,027 and 34,028 Tax rate up to the AOW age Tax rate the AOW age 1 0 to 19,922 36.55% 18.65% 2 19,923 to 33,715* 40.4% 22.5% 3 33,716* to 66,421 40.4% 40.4% 4 From 66,422 52% 52% Example: You receive an AOW benefit of 1,000 gross a month. In addition to this, you receive a monthly pension benefit from PDN which is also 1,000. The benefit agencies separately deduct tax from these benefits according to the tax table. In both cases, the wage tax is based on the first band in 2016. So: AOW 18.65% of 1,000 = 186.50 PDN pension: 18.65% of 1,000 = 186.50 Making an annual total of: ( 186.50 + 186.50) x 12 months = 4,476 The two benefits are added together for the income tax return. Together, they amount to ( 1,000 + 1,000) = 2,000 making 24,000 a year: From the table of tax bands you can see that income from 19,923 must be taxed in band 2, in other words at 22.5%. So: 18.65% on income up to 19,922 = 3,716 22.5% on income from 19,923 to 24,000 ( 4,077) = 917 917 + 3,716 = 4,633. 4,476 is deducted via wage tax. So underpaid tax of 4,633-4,476 = 157 will have to be recovered. Version 25.07.2016 10