By a defined contribution pension gap

Miscellaneous buddha5000 August 8, 2016 0 0
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In a defined contribution scheme limits the tax pension to 100% of your salary. Unfortunately, almost no one gets the maximum norm. The difference between the maximum tax allowed pension and the pension received is your pension gap. Where this pension gap comes from these retirement plan?

The contribution scheme

In a defined contribution plan do you know what amount is paid by your employer to the pension provider as premium. This form is also known as C policy. Because the premium is invested or saved, the yield is not certain. Based on a number of assumptions about the expected efficiency it is possible to give an indication of what the income after retirement. This indication is present to check on the site. In almost all cases, the pension that is indicated as lower than the salary that one earns just before retirement. There are several factors that can cause this pension gap.

Commission and initial costs

At the closing of a new policy is being charged with first commission and expenses. These initial costs are deducted from the premium. This can mean at the start of the policy that you virtually nothing builds the first few years because all the premium is used to pay the sometimes very high costs first. The effect of this method is especially noticeable when you work for a shorter time with several employers and each gets a new defined contribution scheme which is often coupled with a mandatory collective agreement with the employer. Examples of costs that charges an insurer:
  • Commission fee
  • Product cost management
  • Management fees and expenses
  • Industry Discount
  • Initial Costs
  • Extra deposit commission
  • Custody fees

Insurance

Often defined contribution scheme in order to also provide the employee with additional insurances such as life insurance. Insurers are very good to supplement your pension with additional insurance policy realm where sometimes you yourself should note afterwards that you did not need. A small selection of the number of additional insurance that they may integrate into the defined contribution scheme:
  • NHT
  • PVA premium
  • Risk premium ANW gap
  • Widows and Orphans Pension risk Undetermined
  • Partner's pension risk
  • Risk premium Waiver of premium in case of disability
  • Risk premium WAO gap
  • Risk premium Orphan

In a bad case will therefore be used much of the available premium for the insurance taken out, this part of the premium is not used to build up your pension capital.

Contributory making the policy

Once your changes jobs will be created a contributory defined contribution scheme policy. Non-contributory means you pay no premium and more integrated insurance be stopped. While keeping you usually or entitlement to the capital which is saved or invested within your policy. In the contributory period or run some costs such as management fees and administrative costs. In a very bad case, it is possible that your insurance policy is worthless over time once the total costs are higher than the capital that was built up.

Cost Standard

In 2010, a standard was developed for the costs that can be calculated in the pension policy. According to the recommendation of the Association of Insurers may the cost of a pension linked insurance average 9.5% of the pension contribution and 1.5% of the value of the investments. However, this norm money over the lifetime of the policy. All insurers, it is certainly true that in the first five or ten years they work with much higher costs with the idea that one later reduced this cost, because there is still plenty of time. However, once you after a few years makes the contributory insurance policy means you have a much shorter duration paid cost much more than the norm. You may have to pay 30% to 40% of the premium costs that you see also never return, certainly not saved or invested part of the policy.

Premium discount tables and your employer

The premium that you can use up your pension has been capped by the tax authorities. This limit is dependent on your age and rises as you get older. The table below shows the age and the maximum percentage of your gross salary what should be paid in premiums:
What happens is that the employer adjusts the maximum offset and reduce these percentages, for example 60% of the maximum value. There is no legal standard that sets a limit here. Pay close attention to what percentage one uses.
Usually located in the terms of employment or a breakdown of the premium between employer and employee, but they failed to report what proportion of this total which the maximum offset is.Daarnaast there are employers who offer retirement later discuss whether you start with yourself later work . The result is that you also build up less pension.

Premium discount tables and work until old age

The scale is designed so that you are at higher age only going to build most of your retirement. Between 20 and 55 build about half of your pension, the other half must then be built up further. Now it is well known that the number of people who still have a job after the age of 55 is not 50%. So there is a real chance that the second half of the pension is not rebuilt because there is no premium is available for further construction.

Finally

Or you will soon have sufficient retirement income with a C policy depends on many factors, not least what you think yourself still need to have on income. This is probably not your entire paycheck. It is also true that you quickly get used to an increasing salary. A step back is often not easy, after all, the rent or mortgage and fixed costs will have to be paid anyway. Calculate at what you would need for example in retirement income and compare that with what is shown on income. Once this is too different you better sooner than later intervention. You can for instance look critically at all costs in your policy and choose to exclude certain insurance so you build up capital increases. Of course you do this in consultation with your employer and / or pension adviser that you usually need to explain exactly what insurances are all in your insurance policy and what it exactly is and whether there is an option to let the insurance lapse.
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