How does the pension accrual work in practice?
We are pleased to give you an example. It helps if you are familiar with the following concepts.
The pension base (pensioengrondslag) is the basis for each pension calculation. The pension base is your official salary (ambtelijk inkomen) in a given year minus the offset (franchise) that same year.
The offset (franchise) is the part of your salary over which you do not accrue pension as allowance is made for the AOV, which you will receive from the government. The offset in 2020 is Afl. 19,131.
Each year, you accrue 2% pension over the pension base in that given year. This 2% is the accrual percentage (opbouwpercentage). It can be reduced to 1.75% if the pension contribution does not cover the costs of purchasing pension entitlements and executing the pension scheme.
The total that you accrue during your number of service years (dienstjaren) with the government is your pension.
The pension accrual of Frank
Frank works with the government. When he will retire at the age of 65, he will have 35 service years. His annual salary is Afl. 40,000. How much pension will Frank receive when he retires?
|Annual salary:||Afl. 40,000|
|Minus: offset:||Afl. 19,131|
|Pension base:||Afl. 20,869|
|Annual pension accrual: 2% x Afl. 20,869 =||Afl. 417.38|
|Pension per year: 35 service years x Afl. 417.38 =||Afl. 14,608|
In addition to this amount, Frank will also receive his AOV. This is a simplified calculation to show the principle of the pension accrual. In reality, Frank’s salary will not be the same throughout his career. His accrued pension can also be adjusted annually to the inflation via indexation. As of 1 July 2020, the system of automatic indexation, which was linked the indexation of the civil servants’ salaries, has been replaced by indexation that is linked to the increase of the cost of living and to the pension fund cover ratio (dekkingsgraad). Indexation is only possible if the pension fund cover ratio (dekkingsgraad) is at least 105%.
The above accrual applies to the current pension plan of APS. There are other arrangements for employees who have worked with the government for a long time. If you have questions about these older arrangements, the employees of the service desk will be pleased to answer these.