What is CDC pension?
CDC is short for Collective Defined Contribution. In a CDC pension plan, annual contributions are fixed, while the resulting pension is not. As our average life expectancy is rising and financial markets are too volatile to predict, we don’t know in advance whether pension contributions and return on pension fund investments will be adequate. Your pension accrual, pension benefits and future indexations are not guaranteed. They are dependent on the financial resources held by NN CDC Pensioenfonds. The risk that your pension may ultimately be too low to meet your needs or expectations is your risk.
See how much pension you have already built up.
If you want to calculate what this means for your own situation, visit the Pension Planner.
What does CDC mean for me?
While the CDC pension plan is the same for all employees, everyone’s personal situation is different. Solidarity is a fundamental principle of the CDC pension plan, meaning that all results, positive as well as negative, will have to be shared by all employees alike.
The CDC pension plan works as follows:
- You have built up pension entitlement for the salary you earn (up to € 10,734 salary per month in 2023). This amount is adjusted annually to correspond with the maximum amount allowable for tax purposes). This is referred to as your pensionable salary.
- Your state old-age pension accrual (AOW) is taken into account, which is why a part of your salary does not accrue pension. This part is called the threshold for pension accrual (franchises)
- The accrual ambition is 1.875% of your pension base in 2023, provided the contribution is sufficient. Your pension base was equal to your maximum amount of pensionable salary minus the threshold for pension accrual (franchise).
- As long as you remained employed by NN or NN IP, the pension base that corresponds to your pensionable salary accrued pension every year. This is what we call an average salary system.
- The contribution is invested. Return on the investments is needed to pay your pension and to fund future indexation. Indexation is important because it helps maintain the purchasing power of your pension despite inflation. Return on investment is unpredictable, which is why (full annual) indexation of your pension cannot be guaranteed and you cannot be sure your pension will keep pace with annual inflation rates.
- Contributions may be insufficient and return on investments could be disappointing. This will result in less pension accrual and less indexation, or none at all. Ultimately, your pension may be lower than expected. In the CDC pension plan, this risk has been shifted to you personally. Your pension accrual was and indexation is conditional upon the level of NN CDC Pensioenfonds’s financial resources being adequate.
This means that if the result is below expectations, the employer will not make supplemental payments. Reason enough for you to spend some time studying your pension.
View here the roadmap of your pension.
If you work at NN IP, this is important for you to know.
Choose an age
Younger than 35 years
Your pension might seem far away, but that doesn’t make it unimportant.
Between 35 and 45 years
You've been building up a pension for quite a few years already, but how much will you'll be getting when you retire?
Between 45 and 58 years
Have you thought about what you’ll do when you retire or reduce your working hours?
Older than 58 years
Can you even imagine that your retirement is approaching?