The original recording of this videopodcast is available in Dutch.
In addition to the statutory pension and any industry pension, as an employer you can provide a supplementary pension for your employees. A supplementary pension isn’t an instant cash benefit: it’s a long-term benefit which will of course only be paid out when the employee retires. From a tax viewpoint, its more favourable treatment makes it more attractive for both employee and employer than a pay rise.
As an employer, you regularly consider the remuneration principles you want to apply within your company. Have you also thought about implementing these principles in your supplementary pension plan?
The first step is to work out what your company stands for. Are you a caring employer, are you more cost-driven or is your focus on free choice and autonomy for your employees? Opting clearly for one of the many possible remuneration principles provides a firm basis for your supplementary pension plan, but also makes it easier to communicate on this subject to your employees.
A supplementary pension plan is a collective benefit that you arrange for all your employees. Which insurance solution suits your organisation best depends largely on your company’s risk appetite. How do you choose between Branch 21 and Branch 23?
- With a Branch 21 solution, the employer pays a fixed monthly contribution to an insurance company or pension fund, which takes care of management tasks and guarantees a fixed return on the contribution. This is a very safe investment, but unfortunately the returns on it are low in our current economy. The employer, being bound to pay a fixed return, will often have to compensate for the falling interest rate through the market.
- As a result, companies are looking for alternatives and are increasingly turning to Branch 23 solutions. These provide a variable return, which means they involve more risk, but often pay out more in the longer term.
- Finally, as an alternative to Branch 23 solutions, your company can opt to bring the supplementary pension plan into a pension fund. This too will offer a variable return, depending on the performance of the underlying investments
The type of pension plan you arrange as an employer also determines the cost. Should you go for a plan with a fixed contribution per month or a certain percentage on the salary? Or does a cash balance plan seem a more suitable form of pension commitment? Whatever you decide, a customised approach is advisable. You should also always take account of existing plans and any past guarantees by which insurers are still bound.
Businesses are increasingly outsourcing the management of their pension plan to a specialist partner. There are two main reasons for this: the fact that this is quite a complex area, and the frequent changes to government regulations.
At Vanbreda Risk & Benefits we can give you advice and guidance in this area. On this page you can read more about our in-house expertise that is available to you and the actuarial services we offer.
So are there trends in the field of supplementary pensions? There certainly are! And by responding to them, you can stand out from your competitors.
- For some time now, we’ve been seeing a shift in organisations from a Branch 21 to a Branch 23 solution. There’s nothing reckless about this: it represents a deliberate choice of a different approach in order to continue achieving the desired long-term returns.
- A recent survey* shows that younger people are firmly convinced of the added value of a pension on top of what the government will pay out at the end of their working life. More than half would even be willing to forgo some salary in order to build up their nest egg.
- Companies today are increasingly prepared to move away from traditional solutions for managing their supplementary pension plan, and multi-employer funds are growing more attractive. After all, they relieve companies of all management and governance tasks, the employer retains autonomy in its investment policy and there are economies of scale.
source: PensioPlus young people’s survey 2021
