Last Monday, October 7, you received an invitation to attend our Union webinar Transition Plan Metalektro Future Pensions Act live. The webinar has now taken place. Hamadi Zaghdoudi and the undersigned, Gertjan Tommel, took everyone on a journey in an hour-long conversation in the biggest pension change (so far) that is coming. Hamadi even calls it the biggest change that will ever take place in our conversation. You can watch the webinar again via this linkYou can also go for a nice walk and listen to the webinar via this link. The webinar is highly recommended. After all, what is an hour of listening when it comes to a lifelong (good) pension? Ultimately, it is about the pension and what De Unie has agreed on this with other trade unions, employers and pension funds in the Metal and Electrical Industry.
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Judgment De Unie about Transition Plan
At the risk of being dismissed as the butcher who inspects his own meat, I would like to provide insight into how De Unie looks at the result versus the effort we put in. You can read our letter of intent again here. You can read the transition plan here; the full 114 pages. De Unie has chosen to limit itself to focusing on eight (8) important and overarching themes. These topics are:
- Ambition
- Premium
- Pension basis
- Survivors' Pension (NP), (Partner Pension (PP) and Orphans' Pension (WP))
- Excess arrangement
- Compensation for abolition of the average system
- Buffers (Solidarity Reserve)
- sailing in
The excess arrangement (objective 5) is a continuation of the current system and therefore acceptable. The compensation for the abolition of the average system does take place but not via the premium. As a result, employers do not contribute to the transition. A missed opportunity and therefore judges De Unie this as partly achieved and partly not achieved.
All things considered gives De Unie a positive advice to you about this transition plan. We hope that you will receive the plan with the same positive feeling. We believe that with this result we maintain the balance between, on the one hand, maintaining buffers and using them where they are needed and, on the other hand, allocating/distributing pension assets where it is responsible. The future will tell whether we have made the right choices. It is also a fact that the current pension system is not a panacea.
Transition Plan Vote
Have you listened and formed your opinion? Or have you read the transit plan? Or are you guided by the judgment of De Unie? Or all three? The members have received an invitation to vote on the transition plan. With a ja I can live with the transition plan that has been drawn up, do you agree with the transition plan. With a no I can't live with the transition plan that has been drawn up, you vote against the transition plan. With a abstinence leave the choice to others. And that is okay.
Members can vote until Friday, November 1, 13:00 PM.
Need some more information? Then read on. Below is a comprehensive summary of the transition plan.
Process
With around 1.600 billion euros in pension assets, we are talking about a lot of money. In our Metal and Electrical sector, we are building up a pension with PME. PME currently has around 55 billion euros in pension assets. That money belongs to you and your fellow participants. In addition to your monthly salary, it is the most expensive employment condition you have. For that reason, De Unie spent the last two years on blood, sweat and tears. You deserve that too. In the past year, the process has been moving at a rapid pace. That had everything to do with the Future Pensions Act actually being adopted by the House of Representatives and the Senate in mid-2023.
Outline agreement
We have had several rounds of formal and informal talks. The negotiations were at a standstill for a while due to the employers' refusal to make the shift work allowance pensionable. Once that hurdle was overcome, a general agreement was reached quite quickly. You can call that general agreement here. view and download.
Technical commission
After the outline agreement had been reached, a technical committee was set up. Hamadi Zaghdoudi was on the technical committee on behalf of the trade unions. The pension fund also participated in this committee, as did an actuary who acted on behalf of the employers. Regularly, De Unie with Hamadi around the table to discuss dilemmas, principles and elaboration. De Unie has made constructive contributions to various concepts, making the transition plan clearer and more balanced.
VGPME
The Association of Pensioners PME was heard throughout the process. The association meticulously and extensively asked questions about the concept transition plan. With great respect, I supported the input of this association on important points. Based on our discussions with the VGPME, adjustments were made to the transition plan. The piece has become better as a result.
Features of the new pension scheme
The basic pension scheme in the Metalektro, as described in the transition plan, is a solidarity premium scheme that will come into effect on 1 January 2026 (or later if necessary). The most important characteristics are listed below:
- Type of arrangement: A solidarity premium scheme, in which investment risks and risks such as death, disability and longevity are collectively borne. The emphasis is on stability and retention of purchasing power, rather than maximum yield.
- Age of entry: 18 years.
- Retirement age: The first day of the month in which the participant turns 68. However, participants may retire earlier or later.
- Pension basis: The pensionable salary (up to a maximum, adjusted annually, 2024: 89.329 euros) minus the deductible (also adjusted annually, 2024: 17.545 euros). The pensionable salary includes the fixed annual salary including holiday allowance, fixed annual payments (such as 13th month), excess earnings and commission. The shift work allowance will be gradually (over 5 years) included in the pension base.
- Premium: 27,98% of the pension base (up to and including October 2029), unless social partners decide otherwise. The employer's share is at least 61,08%.
- Pension objective: An old-age pension of 80% of the average pension base over 43 years, together with a partner's pension of 50% in the event of death after retirement.
- Benefit type: The benefit is variable after retirement.
- Flexibility: Participants can retire earlier or later (within legal limits), and can withdraw up to 10% of their pension as a lump sum. In addition, participants can also opt for a high/low variant, in which more is paid out for a number of years and then less for the rest of their lives.
- Survivor's pension: A partner's pension and orphan's pension are insured on a risk basis. In the event of death before retirement, the partner receives 20% of the salary (plus a temporary benefit of 5.000 euros), and each child 10% of the salary (20% if both parents have died). In the event of death after retirement, 50% of the old-age pension is paid out as a partner's pension, but this percentage can be adjusted on the retirement date.
Important!: This is a summary of the basic scheme. The full scheme and all details are described in the complete transition plan and associated appendices.
Building in guarantees
The current pension system has a high degree of certainty by maintaining high buffers (up to 20% of the pension assets). These buffers are so high because they have to be maintained for all participants. Young and old have the same buffer.
In the new pension contract, we are still building in certainties, but not to the same extent for everyone. Young participants can take more risk in the investments because they have a long horizon to absorb any negative shocks. Older participants do not have that time and you want to protect them extra. For participants aged 60 and over, we have created the so-called solidarity reserve. We fill this from the fund assets with a minimum of 1% and a maximum of 5%. We are talking about around 550 million to 2,75 billion. The pension payments are currently around 1,5 billion. The solidarity reserve can therefore absorb a shock of minus 3% for at least 10 years (with a reserve of 550 million).
The maximum 5% solidarity reserve is significantly less than the 20% buffer that is currently maintained. That is also the main reason that extra pension can be awarded and paid out earlier in the new pension system. The downside is also true, it also leads to a decrease in pension assets and lower benefits.
Compensation abolish the average system
The average system is a way of calculating pensions in the Netherlands. Instead of individual pots for each participant – which we are switching to with the solidarity premium scheme – an average is calculated for the entire group of PME participants. Everyone, you as an employee and your employer, pays the same premium (total 27,98% of the pensionable salary) to the pension fund. You then received a lifelong annual right (accrual percentage of your pensionable salary) to a pension from the pension fund. This pension accrual was not directly related to your premium payment. Instead, the total premium pot of all participants was divided among all participants, taking into account factors such as age and expected life expectancy. Young participants implicitly subsidize older participants. This is because the premium of young people can yield a return for longer than that of older participants, but both participants still accrued the same amount of pension.
Due to the transition from the average system to individual pension pots, that subsidy from young to old has disappeared. But that does mean that a group of 37 to 67 years old now do not receive the subsidy that they did give and therefore are expected to receive less pension if we do not compensate them. We have agreed that we will compensate this group. Whereby people between 50 and 55 years old receive the highest compensation because they experience the greatest disadvantage.
This compensation is paid from the fund assets. The calculations show that with a minimum compensation of at least 1,5% of the fund assets, all participants are compensated in such a way that they do not suffer any disadvantage compared to the current pension contract. We aim for 3,5% of the fund assets because then the effects of the abolition of the average system can be fully compensated. The figure below shows how much compensation is awarded to the various age cohorts. This is expressed as a percentage of the pension base.
Example: If you are 56 years old, you will receive 3,5% of the pension base as additional pension assets with full compensation (from the 40% of the fund assets). For example, if you earn 57.545 euros, the pension base is 40.000 euros. You will then receive 16.000 euros in compensation.
It is of course great that we have found the fund willing to finance this compensation. But of course it comes from the money of the total number of participants. Your money. For that reason, I wanted De Unie this compensation from extra premium financing. By means of extra premium, employers also contribute (at least 61,08%) to the transition to the new pension system. Because all risks from the start date of the new pension contract will be borne by the participants. We therefore believe it is balanced that employers also contribute an extra bit. For that reason, this component is colored for De Unie orange, the compensation has been realized but from the wrong source of funding. Incidentally, this is for De Unie no reason to reject the transition plan.
What does this transition plan mean for you now?
To give you some idea of what this means for you as a participant, I am copying Figure 1 from page 32 of the Transition Plan here. This figure shows the expected benefits in three scenarios compared to the FTK (=100%). Red is the bad weather scenario. Blue is the partly cloudy/watery sun scenario (median) and green is the sunny weather scenario. The dotted line is for the sleepers. The thick line is for active and retired people.
Figure 1 Expected benefits – Coverage ratio 110% including full compensation
From left to right, you go from an 18-year-old to an 85-year-old participant. The table below the figure shows how high the expected benefits are compared to the current system (FTK) for different ages in the three different scenarios. In the green and blue scenarios (good and average), all ages stand out positively. In the red scenario (bad), the under-60s will receive less than in the current FTK. The over-60s still stand out positively in this bad scenario.
Example: in the median (blue) scenario, the expected pension benefit for a 30-year-old is 109% and for a 45-year-old 104% and for a 55-year-old 103%. This means that participants of that age are expected to receive 9%, 4% and 3% more pension at retirement, respectively, than in the current pension scheme.
Based on this data, De Unie of the opinion that we will at least ensure that in the average scenario the new pension contract will lead to better results than the current pension contract. And with that it meets what De Unie concerns the principle that no one should be worse off as a result of the menopause.
Questions?
This call to vote and the explanation of the transition plan may raise questions for you. Please ask them by sending an email to gertjan.tommel@unie.nl. You can also call 06-5252 2034. But don't pick up a pen or pick up the phone until you've watched the webinar or listened to the podcast. We'll go into much more detail about the why, the how and the what of the gigantic pension operation. But don't hesitate to ask your question afterwards. We'll be happy to answer your question.
