Pension cappingWebinar - November 3, 2015

• Changes to the Dutch pension system

• How does capping work?

• Net pension versus Net annuity

• What solutions does Loyalis offer?

• Fiscal conditions for Net annuity

• Loyalis Top widow’s annuity

• Loyalis Top old-age annuity

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Topics

The Dutch pension system

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3rd pillar: Individual supplement annuity/tax-efficient blocked bank savings account/regular savings account

2nd pillar: Pension via the employer at ABP and APPA:Old-age, Widow’s and Invalidity pension

1st pillar: Payment via the government: AOW (state pension), ANW (benefit under the Surviving Dependants Act) and WIA (benefit received under the Work and Income (Capacity for Work) Act)

We are working and living longer

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The pension system is changing:

• Because of a higher retirement age and longer working career, the government insists that a lower accrual rate can suffice for pension accrual.

• Prompted by these developments, the accrual rate at pension funds has been reduced.

• The reduction in this accrual rate has an impact on the basic pension. Both on old-age and widow's pension.

We are accruing less pension

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• The second measure limits the income on which tax-facilitated pension is accrued to € 100,000.

• No old-age or widow's pension is accrued via the employer on income in excess of this limit.

• We call this “a cap on the pensionable salary.”

• Both the adjustments to the basic pension plan and the limit on accrual to income up to € 100,000 are consistent with a policy in which people are encouraged to continue to work and the government finances are put in order.

Effect of austerity measures:

Salary Development in years

€ 150,000 2013 2014 2015* %

Accrual % 2.05% 1.95% 1.875%

Old-age pension € 2,850 € 2,707 € 1,637 - 40%

Widow’s pension €1,425 €1,354 €818 - 40%

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* The amounts have been calculated on the basis of the accrual rates and deductibles in the relevant year. From 2015, both the reduction in the accrual rate and capping have an impact. Source: ABP

Niels, 45 years oldSalary € 150,000 and working full time (part-time factor 1.000)

Capping at € 100,000

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How does capping work?

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1st pillar: Government AOW / ANW

2nd pillar:Pension via

the employer at ABP or

APPA

3rd pillar: Individual

supplement

Prior to 2015 From 2015 onwards

Capping at € 100,000

1st pillar: GovernmentAOW / ANW

2nd pillar:Pension via

the employer at ABP or

APPA

3rd pillar: Individual

supplement

• You will no longer accrue any old-age and widow's pension via the

employer in the basic pension plan.

• More of the responsibility is being shifted to you as an individual. You choose whether and to what extent you want to supplement your basic pension.

• You are free to choose where you have the supplementary facility administered.

• The government provides certain latitude under the tax regulations in which you can supplement your pension tax-efficiently.

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But what does this mean for you?

A lower old-age and widow’s pension

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Niels, 45 years old, married with 2 children

Salary € 150,000 and working full time (part-time factor 1.000).

Pension shortfall for income in excess of € 100,000:

1. Old-age pension: € 9,900 net per year

2. Widow’s pension: € 5,940 net per year– For the partner: € 4,950– For the children until they reach the age of 21: € 990 (per child)

11Prior to 2015 From 2015

onwards

Capping at € 100,000

The capping of your employer pension at € 100,000.

Net pension/net

annuity

1st pillar: Government AOW / ANW

2nd pillar:Pension via

the employer at ABP or

APPA

3rd pillar: Individual

supplement

1st pillar: GovernmentAOW / ANW

2nd pillar:Pension via

the employer at ABP or

APPA

3rd pillar: Individual

supplement

Net pension versus Net annuity

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Features of Net pension• Collective facility in accordance with Pension Act in what is called the second

pillar

• The Dutch second pillar consists of pension benefits and pension entitlements which employees accrue during their working life.

• Pension in the second pillar is therefore always accrued in the employer-employee sphere.

• The premium is paid by the employee via the net salary. The employer pays the premium to the pension fund.

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Features of Net annuity• An individual product in what is called the third pillar.

• This enables employees to save extra pension themselves or cover a risk, tax-efficiently.

• The premium is paid by the employee directly to Loyalis.

• This may be facilitated by your sector or an employer, which means favorable conditions apply or a better premium.

• A net annuity in the third pillar is therefore always accrued in the Loyalis - employee sphere, without the involvement of the employer.

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What does Loyalis offer?

• Our strength is our knowledge of pension, of the sectors, the CLAs and the pension contracts.

• We therefore offer complete products that tie in with what is already provided for in collective pension plans.

• We do this in the third pillar.

• Our solutions for the capping are therefore net annuity solutions.

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Tax advantages

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Fiscal conditions for net annuity

You put in a net amount:• During the accrual period, you are exempt from the 1.2%

investment yield tax in Box 3.• No tax is withheld from the payments from the retirement date or

upon death.

There are limits on how much you can put in:• Your maximum annual contribution (annual latitude) is a percentage

of the Box 1 income in excess of the cap of € 100,000.• The percentage you can put in depends on your age and increases

the older you get (see table below).

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Annual latitude for net annuity

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Niels is 45 years old and earns € 150,000 (assuming that his Box 1 income is the same). According to the table above, Niels can use 6.8% * € 50,000 = € 3,400 for his annuity.

Net annuity solutions

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Loyalis Top widow’s annuity

• On 01/01/2015, an acute shortfall arose in the widow’s pension because of the capping.

• 500 employers therefore made up this shortfall for you in 2015 with the insurance: Loyalis Top widow’s annuity - employer policy

What is changing in 2016? Make a decision on whether to continue the insurance.• The temporary insurance stops on January 1, 2016. • That is why you must personally decide whether to continue to supplement

your basic widow's pension from ABP and APPA.• You therefore receive an offer from Loyalis to continue the insurance under

favorable conditions and at an attractive premium.• So if you do not want a lower basic widow’s pension, you must take action!

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2015 situation: Acute problem, temporary collective solution

• You can continue the insurance that your employer took out for you by means of the Loyalis Top widow’s annuity - employee policy.

• With this, you will continue to supplement your basic widow's pension from ABP from January 1, 2016 onwards.

• The supplement to the basic widow's pension includes:– A payment for your partner and children – Premium waiver in the event of disability

• If your sector or employer has concluded an agreement with Loyalis, more favorable acceptance conditions and a discount on your premium applies.

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Want to continue the insurance? The choice is yours!

Features of Loyalis Top widow’s annuity - employee policy

• Risk insurance with a premium that increases annually• Can be canceled month-to-month• For your partner (co-habiting at the same address for at least 6 months) and

your children up to the age of 21.• Net payment in the event of death: lifelong for partner and temporary for

your children up to the age of 21 years.• Minimum insured amount of € 1,500 net per year. • You can keep the insurance if you change employer (a different premium will

apply).

Extra service: • Loyalis calculates your personal supplement annually. We make sure that

your insurance always ties in with the basic pension plan from ABP or APPA. • We calculate this using your (pensionable) income and part-time factor.

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Advantages of an agreement

Your sector or employer has concluded an agreement. As a result, you profit from:

1. A discount on your premium.

2. Lower one-time distribution costs (€ 40 instead of € 95).

3. No health questionnaire if you are already insured or for new employees who sign up within 3 months.

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Net annuity solutions

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Loyalis Top old-age annuity

Situation in 2015: No acute problem, therefore no facility as yet• On 01/01/2015, a shortfall arises in the old-age pension because of the capping.• Because of the capping, you will be losing the part of your old-age pension that is

accrued on the portion of your income in excess of € 100,000. It is not a disaster if you have not yet made any arrangements. However, if you want to continue to live according to the standard you are accustomed to, it is a good idea to start accruing as soon as possible.

What is changing in 2016? Choose a supplement for old-age pension.• You decide when and how much you put in.• Use the tax latitude you still have in 2015.• You can sign up digitally.• So if you do not want a lower basic old-age pension, you have to make a decision!

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Loyalis Top old-age annuity

Loyalis Top old-age annuity

• Supplement to the basic old-age pension at ABP and APPA

• Individual trade account with lifecycle structure

• Net annuity tax-efficient blocked investment account via Loyalis Sparen & Beleggen

N.V. developed with the knowledge, expertise and purchasing advantages of APG.

• Fully flexible contribution up to maximum the amount allowed under the tax regulations.

• Payment can be lifelong or temporary.

• Under certain conditions, the assets may be withdrawn in the event of disability.

• In the event of death, the capital (100%) goes to the heirs.

• Extremely low costs

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Lifecycle – Composition of funds• Investing according to a Lifecycle model

Loyalis invests according to a lifecycle investment structure with three underlying funds. As the retirement date approaches, the risk is phased out. The lifecycle ensures that you take the opportunity to achieve a good return, while the risks decrease over time.

• Your assets are invested in 3 different funds:– The Loyalis Global Equity Fund

Shares in companies in developed countries and emerging markets– The Loyalis Global Interest plus Fund

European corporate obligations and government obligations from emerging countries

– The Loyalis Global Interest FundSafe European government obligations (70%) and global government and corporate obligations (30%)

• Asset growth and asset retention for the long term are the priorities.

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Lifecycle – Composition of funds

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Lifecycle – overview of expiration pattern

Lifecycle – spread across the funds

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Risk decreases as you get closer to your retirement date:

What happens if you die?

• During the accrual phase– No loss of assets: the full capital goes to your heirs.– Your heirs receive a payment for surviving dependants.

• During the payment phase (your retirement has started)– No loss of assets: your payment continues until the original end

date and goes to your heirs.– If you receive a life-long payment, the payment may transfer to your

partner. This payment ends when your partner dies.

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What happens if you become disabled?

• In the event of long-term disability, you can withdraw the assets you have accrued, under certain conditions.

• Not a complete replacement of your disability facility, especially not if only a small amount has been accrued.

• Withdrawing your accrued assets upon becoming disabled causes your old-age capital to be lower.

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1. Distribution costs: one-off € 40

2. Fixed: € 35 in administration costs per year

3. Variable: on the accrued capital. 0.35% per year

4. Costs for buying and selling: on average 0.03% per year

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What does the Loyalis Top old-age annuity cost?

How can I take out the Loyalis Top old-age annuity?

• You can sign up digitally via loyalis.nl/tol

• Our calculation module allows you to easily calculate your pension shortfall, annual latitude and desired contribution.

• You pay € 40 (one-off distribution costs) and € 35 (fixed administration costs for the 1st year) via iDEAL

• After you purchase the product, you will receive login details for the participant portal.

• You can be flexible in putting contributions in (up to maximum your annual latitude).

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Summary

• Loyalis Top widow’s annuity: make sure your surviving dependants are well taken care of (personal offer by regular mail).

• Loyalis Top old-age annuity: a supplement to your old-age pension (sign up digitally)

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Thank you for participating!

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Want to know more?

www.loyalis.nl/pensioenopbouw-aftopping