Fixed or Variable Pension

What is Fixed or Variable Pension? 

You accrue a pension capital in your pension scheme at Zwitserleven. On your retirement date, the accrued pension capital will be used to purchase a pension benefit with an insurer of your choice, such as Zwitserleven. At that time you make the choice for a fixed or a variable pension. 

  • What is a Fixed Pension?
    • With a Fixed Pension, you will purchase a retirement pension and possibly a partner’s pension from an insurer, such as Zwitserleven, when you retire. The amount of your pension will be fixed on the retirement date. And so it is certain. We therefore call this option Fixed Pension. Once you have retired, you do not have any investment risks anymore with a Fixed Pension. 
  • What is a Variable Pension? 
    • A Variable Pension works differently. When you retire, the insurer (such as Zwitserleven) will use part of your pension capital to purchase your pension benefit for the first year. The amount of this benefit is fixed for one year. The payments in subsequent years depend on the development of the value of your investments. Your remaining pension capital will still be invested by the insurer after your retirement date. As your pension capital is invested, the amount of the pension benefit may change. The benefit is therefore not certain. Therefore we call this option Variable Pension. If the investments go well, the payment can be higher. But the payment can also be lower if things do not go well with your investments. With a Variable Pension you therefore also take investment risks after the retirement date. 

When choosing a Variable Pension, most insurers offer 2 options. This also applies to Zwitserleven.

2A. Flat Variable Pension

The intention of a ‘Flat Variable Pension’, is that your pension remains the same every year. However, this is not certain. The Flat Variable Pension is higher in the first year than a Fixed Pension. This is because your benefit with a variable pension is not guaranteed by the insurer. The return that you achieve each year, because the pension capital is still invested, will be used by the insurer to adjust your pension every year. This can lead to a higher or lower pension than the year before. 

2B. Declining Variable Pension

The intention of a ‘Decreasing Variable Pension’, is that your pension decreases annually. The decrease may differ per insurer. You start with a Decreasing Variable Pension with a higher pension. And this pension is expected to decrease slightly every year. The pension you start with is higher than with a Flat Variable Pension. The return that you achieve each year, because the pension capital is still being invested, will be used by the insurer to adjust your pension benefit. This may cause your pension benefit to decrease more or less than the decrease assumed in advance. 

Note:  
If you choose a Variable Pension, this can also result in a variable partner’s pension. With (some) insurers you can choose the partner’s pension to be fixed. You have to make this choice on your retirement date. 

Who is Variable Pension intended for? 

Variable pension can be interesting if you are still willing to invest after your retirement date. And you expect that a pension based on investments will have a better result than a certain pension (Fixed Pension). 

If you do not make a choice, a Fixed Pension will be the default. 

Please note: If you choose a Variable Pension, this applies for as long as you receive your pension. You cannot switch to a Fixed Pension after your retirement date. 

When is Variable Pension suitable for you? 

here are advantages and disadvantages to variable pension. Whether it suits you depends on what you find important. And your financial situation. 

Pros

  • You start with a higher pension than with a Fixed Pension. 

  • If the investments yield sufficient returns, your pension benefit may increase in the future. Your pension does not increase with a Fixed Pension. 

  • If interest rates rise, your pension benefit may increase in the future. 

  • You can choose (with most insurers) between a Flat Variable Pension or a Declining Variable Pension. With a Declining Variable Pension you have a higher payment in the first year. But the intention is that your pension will decrease every year after that. 

Cons

  • If things go wrong, your pension will decrease. 

  • Your pension can be adjusted annually. As a result, you do not know how much pension you will receive each year. 

  • Your pension may become lower in the future due to poor investment results, falling interest rates and/or a higher rate from the insurer. A Variable Pension can become lower than a Fixed Pension. 

  • Variable Pension can (usually) only be taken out via an adviser. 

  • You cannot combine a variable pension with a High-Low pension. This is possible with a Fixed Pension. For this choice, see the information on the page “High-low pension” on this website. 

  • The amount of the partner’s pension may also depend on annual developments. If that is the case, the partner’s pension may also be lower. 

Suitable:

  • If you want to invest (part of) your pension capital with the chance of a higher pension. And you can bear the risk of a lower pension. 

  • If you don’t mind if you receive a different pension (higher or lower) every year. 

  • If you do not run into financial problems if your pension benefit falls. So if you have sufficient other financial resources to pay recurring expenses. For example, other pensions, your partner’s pension, an annuity or savings. 

  • If you do not want to be dependent on the market interest rate when you retire. But rather spread the risk of an unfavorable interest rate. 

Not suitable:

  • If you do not expect to receive enough income after your retirement. 

  • If you do not want fluctuations in the amount of your pension. 

  • If you do not accept any risks with your pension after your retirement date. 

  • If you expect stock markets to fall. 

  • If you want to use of the possibility of receiving a High-Low pension. For this choice, see the information on the page “High-low pension” on this website. 

    What alternatives are there? 

    There are no comparable alternatives to a Variable Pension for your pension capital at Zwitserleven. If you do not choose a Variable Pension, you will receive a Fixed Pension. 

    However, if you have savings or other resources after your retirement, you can use them to invest. Just like a Variable Pension, this means that you continue to have the chance of more or less money in the years after your retirement date. 

    How do you arrange a Variable Pension? 

    Before your retirement date, we will inform you about your upcoming retirement and the options which are available for you. When choosing the insurer that will pay your pension benefit, you can indicate whether you want to a Fixed or Variable Pension. It is important that you first ask this insurer what options they offer. Not every insurer offers (all) the options. 

    When you retire, you have the one-off option to choose a Fixed Pension or a Variable Pension. 
     
    If you do not use the option for a Variable Pension, your pension will be paid out on the basis of a Fixed Pension by default. 

    Before your retirement date you can already indicate whether you want to adjust your investments to a Variable Pension. We call this preparing for a Variable Pension. You do not have to make a final decision for a Fixed or Variable Pension yet. You can, however, see on your participant portal in the menu for preparing for a Fixed or Variable Pension what the consequences are for your expected income by choosing a Fixed or a Variable Pension. Also for your income if things go well (optimistic income) or if things do not go as expected (pessimistic income). You can see your pension results on your retirement date and 10 years after your retirement date. For more information about this choice, see the page “Preparing for a Fixed or Variable Pension” on this website. 

    Note: Variable Pension is a complex product. A Variable Pension option cannot be reversed. That is why Variable Pension can only be chosen with (most) insurers after advice from an advisor. 

    Need advice?

    We are pleased to assist you with your retirement choices. Those choices can have major financial implications. Our guidance is only about your Zwitserleven Pensioen. Whether a choice is right for you naturally depends on your entire personal situation. Now and in the future. Have you thought about asking an advisor? They can give you an overview of all your financial affairs. And help you make the most appropriate choices.