Accrual percentage guideline
How much contribution does the employer pay to the pension fund?
The employer pays a fixed monthly contribution to the pension fund.
For the years 2020 to 2024, the contribution has been set at 37% of the pensionable earnings.
The employer is never obliged to pay a higher contribution and will never do so.
On 1 January 2020 the employer will make a one-off payment of 4% of the pensionable earnings to serve as a contribution reserve fund.
What is the maximum pension you can accrue?
The projected pension accrual in the CDC pension plan is 1.875% per year, which is the maximum accrual percentage permitted for tax-facilitated average pay plans. In 2021 the pension accrual is 1.760%.
Pension is accrued on the monthly pensionable earnings.
How much contribution do we need for the projected pension accrual?
- The pension fund determines at the end of each year whether the fixed contribution received from the employer is sufficient for the projected pension accrual for the coming year.
First of all, the price of the new accrual is calculated using the cushioned cost effective contribution method. This cushioned cost effective contribution takes account of the expected return on the investments.
Next, the pension fund determines the . The award of the projected pension accrual is conditional on the contribution funding ratio being 100% or more, unless the is lower than 105% at the end of November. In this case, the contribution funding ratio must be at least 105%.
- If the fixed contribution is higher than the cushioned cost effective contribution and the contribution funding ratio requirements have been met, the pension accrual rate for the coming year is 1.875%.
What happens if the fixed contribution is not sufficient in a given year?
If in a given year the fixed contribution is not sufficient to achieve the full pension accrual, cash can be withdrawn from the contribution reserve fund.
However, the contribution reserve fund may never be less than zero.
If the contribution reserve fund is not sufficient, the accrual rate is proportionately reduced.
The lower accrual rate is applicable for one year. In 2021 the accrual rate is 1,760%.
The lower accrual rate not only applies to the retirement pension, but also to the partner's pension.
The difference between the actual accrual and the projected accrual in a year is not made up in the subsequent years.
What happens if the fixed contribution is more than sufficient in a given year?
The surplus is added to the contribution reserve fund if
- The fixed contribution in a year amounts to more than the cost effective contribution that is required
for an accrual percentage of 1.875% and
- The contribution funding ratio is at least 100% or at least 105% if the UFR funding ratio is lower than
105% at the end of November.
Any remaining funds in the contribution reserve fund at the end of 2024 will be added to the pension fund's assets for the benefit of all beneficiaries.