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Value Transfers during the transition period

PensioenPro published a background article on June 17, 2024 on the impact of the Transition on value transfers. Hyfen CEO Hidde Terpoorten, as value transfer specialist, contributed to the article. Read the entire article below.

Value transfer can take years - without participants knowing it

In a way, the situation resembles that of several years ago when many pension funds were underfunded due to low interest rates, Terpoorten said. 'At that time, too, value transfers were not possible at a number of funds for a long time.' The difference, however, is that when there is underfunding, a fund may not process a value transfer. With value transfer during the transition this is allowed, only then participants are put on hold.

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Individual value transfer can benefit sleepers Terpoorten says he anticipates the latter by offering a "waiting list" for participants. 'They automatically receive a signal and a value transfer proposal as soon as value transfers between two funds are possible again.' For this, there is a statutory deadline of three months after a value transfer is again possible between funds. The ban on value transfer during the transition ended up in the Pension Act during the discussion of the Wtp via an amendment by SGP MP Chris Stoffer.

Hidde Terpoorten, CEO Hyfen

Agreements Pension Federation

Some pension funds have sent their participants a brief message about the upcoming vesting period, such as recently the KLM Ground Fund. Many funds have not yet done so, including the largest five and those that plan to retire in 2025. The Pension Federation will soon publish a service document for members in which "communication aspects toward the participant also play an important role," according to a spokesperson.

In addition, the Pension Federation is consulting on a central recording by the Sivi of when funds and circles are cashing in. This data will be automatically shared with all administrative organizations and pension funds involved. Any shift in a fund's transition date will also be processed automatically, the spokesperson explained.

Choice guidance

According to Terpoorten, the suspension has mainly to do with the desire for unambiguous communication about the value transfer to participants. This should prevent any ambiguity about the effect of cashing in on the transfer value calculations. The spokesperson for the Pension Federation also points out that the suspension means that participants will not have to go through a transition twice. "That avoids surprises for this group.

In addition, Terpoorten sees that the information a participant receives on a value transfer is likely to take on a different character. 'Nothing has been agreed on this in the law, but communication about pension choices must be in line with the AFM guideline on choice guidance. The AFM is strict on that point.'

What you as a participant get to see in the documentation during a value transfer is really different in the old system than in the new, Terpoorten explains. 'You now only get a proposal as a participant for the transfer value from the new fund. Sometimes that includes a calculation, but you can't do much with that as a participant because you don't know what you're giving up in return.'

In the explanation of value transfer in the new system, Terpoorten says you can address a fund's solidarity reserve policy. 'How high is the reserve and in what way is it filled? What returns are allocated to which cohorts?' Investment policy is also relevant. 'This involves choices for participants and about esg policy. Also, of course, as now, you keep fund-specific elements such as earlier or later retirement and the high-low construction.'

As with other communications, Terpoorten expects explanation of value transfer new style, a layered format, where the participant can click through to more specific information. The explanation is thus much more extensive than in the current situation, in which the participant himself has to search for information about, among other things, the differences in indexation policy between the old and the new fund.

Terpoorten observes that administrators and pension funds do not yet have the subject of value transfer high on their list of priorities, even though the first funds are already sailing in six months. "I see very few concrete processes or communication plans ready in the sector on this subject. In that respect, a widely supported format would be a good idea. We as a platform are also taking a role in this.'

How does value transfer work?

When someone changes jobs, they may be covered by a different pension plan. There are then two choices: the accrued entitlements remain with the 'old' pension administrator and the participant becomes a sleeper there, or the participant takes the value of the entitlements with him to the new administrator and buys new entitlements there.

The value of the entitlements to be taken along is usually as high as the entitlements purchased from the 'new' fund, according to the adage '100 = 100'. That remains true from the transition, says actuary Daan Kleinloog of Sprenkels. 'You do not receive solidarity or risk-sharing reserves with a value transfer, and start participating in the buffer of the new fund 'for free' without contribution.

In addition, a participant can compare the quality of the old and new pension plans, for example the indexation policy, and factor that judgment into the decision to stay or transfer. A number of pension funds offer comparison tools for this purpose, such as the Pension Comparator.


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