If you are nearing retirement – and you have accrued pension capital with which to buy a pension income – you can choose between a fixed or a variable pension at Zwitserleven, or a combination of the two. This is also the case even if you have accrued your pension capital at another pension provider. But what must you take account of when making this choice?
The differences between a fixed and a variable pension
|Fixed pension||Variable Pension|
|Purchasing pension income||You use your pension capital to purchase pension income in one go for the rest of your life.||You purchase pension income each year for that year. You continue to invest with the rest of your pension capital.|
|Amount of your gross pension income||Every month you receive the same amount; year in, year out.||Every year, your pension income is re-determined based on the returns on your investments, market interest rates and average life expectancy.|
|Investing||Your pension capital is not invested. So it does not matter as regards your pension income whether the stock market is doing well or badly.||Because you continue to invest, you have a chance of higher pension income: if investments do well, your pension income may rise. But if investments disappoint, your pension income may fall.|
|Flexibility||A fixed pension is always 100% fixed||With a variable pension it is often possible to continue investing not with your entire pension capital but with part of it. Your pension income then consists of a fixed part and a variable part. At Zwitserleven, the variable part can be between 1 and 100%. This means that your pension can match your financial situation exactly.|
|Market interest rate||The amount of your pension income depends on the market interest rate on your retirement date. If it is low, this results in less pension income. Because your pension income is fixed, your pension income will not change if market interest rates subsequently rise or fall.||Every year, you purchase pension income from your pension capital. As a result, you are not dependent on the market interest rate at any one time. If interest rates are rising, that will have a positive impact on your pension income. If interest rates are falling, that will have a negative impact. So this could be different every year.|
|Life expectancy||Your pension income depends on the average life expectancy at the time you retire. If life expectancy is rising or falling, this will not affect your pension income.||Average life expectancy plays a role in determining your annual pension income. If life expectancy is rising, this will have a negative impact on your pension income. If life expectancy is falling, this will have a positive impact on your pension income.|
|Purchasing power||When life gets more expensive, your pension income does not increase accordingly. Over the years, your purchasing power decreases and you can buy less and less from your pension income.||If your investments yield enough, your pension income may increase. Your purchasing power will then remain intact to some extent. If investments perform worse than expected, you may be able to buy less from your pension income and your purchasing power will decrease.|
|Taking out a policy||At Zwitserleven, a policy can be taken out directly and through an adviser.||At Zwitserleven, a policy can be taken out only through an adviser.|
Need advice on your choices?
We are happy to help you make choices for your pension. These choices may have major financial implications. Our guidance covers only your pension scheme with Zwitserleven. Whether a choice is right for you obviously depends on your whole personal situation, now and in the future.
Perhaps you should consider contacting an adviser, who can give you an overview of all your financial affairs and help you to make the most suitable choices.