3 benefits of personalised pension schemes for employees

We should dream about our pension more often... Because what would it be like to comfortably spend every winter in Spain and only enjoy the pleasant spring and summer months in the Netherlands? Or, perhaps you want something totally different. Maybe you secretly dream of swimming in your own Scrooge McDuck money bin? (Haha, just kidding, no one should want that.) Maybe you want nothing at all, just to relax after all those years of hard work without worrying about your income.

Whatever you want, you need money for your pension. But most pension plans are collective, and not adjusted to your age, lifestyle, and contribution. The amount of risk you take is determined for you without a look at your personal situation. Fortunately, personalised pension plans also exist where the investment strategy is tailored to you. In this blog, we explain what they are and what benefits you can get from them.

What is a personalised pension?

Personalised pension plans are a modern approach to pension accrual, where your unique profile is central. In contrast to traditional, collective pension schemes, which are the same for everyone within an organisation, personalised pension plans offer you the freedom to fully align your pension accrual with your personal situation. This means you can decide how much you want to contribute monthly, what investment risk you want to take, and how you want your pension pot to grow. This flexibility gives you more control over your immediate and distant financial future, allowing you to set up your pension exactly as you wish. Whether you dream of spending the winter in Spain, want to learn something new, or simply want to enjoy a carefree life after your career, a personalised pension plan can make your retirement dreams come true.

How do you build a personalised pension?

The third pillar of the pension system offers you the opportunity to supplement and personalise your pension accrual yourself. This is in contrast to the first and second pillars, which consist of the state pension (AOW) and the collective pension schemes via the employer, respectively. In the third pillar, you are the boss of your own pension pot. Here you have the freedom to decide for yourself how much you want to save and how you want to invest it. 

For example, you can opt for a pension insurance, a pension savings account, or an investment account. Because you have control over the accrual and the design of your pension, the third pillar offers you the opportunity to actively plan your financial future and adjust it to your personal wishes and life circumstances. This allows you to ensure that your pension accrual fully aligns with your own goals, such as retiring earlier, realising big dreams, or simply enjoying a comfortable retirement. But what are the concrete benefits of the personalised pension plan for employees?

1. You get tax back, leaving you with more of your hard-earned money

Putting money aside in a bank account essentially only costs you money because you have to deal with low interest and inflation, and because you have to pay tax on your savings as soon as you exceed the tax-free allowance of €57,000 (€114,000 if you have a tax partner). Saving via the third pillar, on the other hand, is fiscally advantageous because the government offers tax benefits to stimulate this type of investing and saving. 

The contribution you make to a pension product within the third pillar is deductible from your taxable income up to a certain maximum. As a result, you pay less income tax in the year you make the contribution. This way you save indirectly throughout the year. What will you do with that money? Once you get it back, you can go on holiday with it. OR you can put it back into your pension, where you then get extra returns AND you get income tax back again the following year. *Ka-chinggggg!* Can you hear that money printer going?

Furthermore, the returns on your contributed amount within this pension scheme are generally not taxed as long as the money remains in the scheme. This means your assets can grow tax-free, which can ultimately lead to a significantly higher pension pot in the long term. Tax is levied when the pension is paid out, but this happens at a lower rate. Pensioners pay less tax because specific tax brackets exist for them. The third pillar thus offers not only flexibility and control, but also significant tax advantages that contribute to a comfortable old age.

2. You know exactly what happens with your pension and keep full control yourself

One of the most important advantages of personalised pension plans is the transparency and control they offer. In contrast to traditional pension schemes, where employees often have no insight into how their pension is managed or exactly how much they have accrued, a personalised plan gives you complete transparency. You can view how much money is in your pension pot at any time, how it is being invested, and what return you can expect.

In addition, this form of pension accrual offers you the flexibility to make adjustments based on changes in your life. Whether you get promoted, want to use a bonus effectively, decide to work less, or have unexpected costs, you can easily adjust your monthly contribution. This means that you can constantly align your pension plan with your current financial situation and future goals. This combination of transparency and flexibility not only gives you more control over your pension, but also ensures that you are better prepared for your financial future.

3. You pay less pension costs, leaving you with more to save

Traditional pension funds can entail high costs, mainly due to the complex structures and the many parties involved. All those parties must also be paid. Collective pension funds are also often active funds (in English, "Actively Managed Funds") and, that means that shares, bonds, ETFs are actively bought and sold by advisors. These also have to be paid. And that reduces your return.  

Many personalised pension plans do this differently. They often use modern technology to lower costs. Automation reduces the number of people needed to do things like transactions, rebalancing your portfolio based on the market, and implementing new investment strategies (not everyone does this, but Vive does). 

Personalised plans are less dependent on intermediaries and expensive administrators, meaning costs are generally lower. This means that more of your money actually goes towards your pension accrual, which ultimately leads to a higher pension. Furthermore, the efficient structure of personalised pension plans can contribute to better returns in the long term, as less money is lost to costs and inefficiencies.

Personalised pension plans: saving but more advantageously

Personalised pension accrual offers a clear added value compared to traditional collective schemes and also compared to saving yourself via a bank. It not only offers the flexibility and control you need to adjust your pension to your own lifestyle and goals, but it also provides significant tax benefits, allowing you to keep more of your savings. 

Because personalised pension plans are often associated with lower costs and more efficient management, more of your money remains for the actual accrual of your pension. Essentially, personalised pension accrual is a smart way to save, which not only ensures a carefree old age but also financially helps you realise your dream pension. It is a modern, transparent, and cost-efficient way to secure your financial future, with more advantages than simply saving in a bank account. Whatever dream you have for your retirement, you can achieve it with a personalised pension plan. 

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