3 benefits of personalized retirement plans for employees

We should dream about retirement more often... Because what would it be like to spend a nice winter in Spain every year and only spend the cozy spring and summer months in the Netherlands? Or, maybe you want something completely different. Maybe you secretly dream of swimming in your own Uncle Scrooge money warehouse? (Haha joke, no one should want that.) Maybe you don't want anything at all, just relax after working hard all those years without worrying about your income.

No matter what you want, you need money for retirement. But most retirement plans are collective, and not customized to your age, lifestyle and contributions. The amount of risk you take is determined for you without taking a look at your situation. Fortunately, there are personalized retirement plans where the investment strategy is customized to you. In this blog, we explain what these are and the benefits you can get from them.

What is a personalized pension?

Personalized retirement plans are a modern approach to pension accrual, with your unique profile at its core. Unlike traditional, group pension plans, which are the same for everyone within an organization, personalized pension plans give you the freedom to tailor your pension accrual entirely to your personal situation. This means you can decide how much you want to deposit each month, 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 design your retirement exactly how you want it. Whether you dream of spending the winter in Spain, learning something new, or simply enjoying a carefree life after your career, a personalized retirement plan will make your retirement dreams come true.

How do you build personalized retirement?

The third pillar of the pension system allows you to supplement and personalize your pension accrual yourself. This contrasts with the first and second pillars, which consist of the state pension and collective pension plans through the employer, respectively. In the third pillar, you are the master of your own pension pot. Here you have the freedom to decide how much to save and how to invest it. 

For example, you can choose a retirement insurance policy, retirement savings account, or an investment account. Because you have control over how your pension is built up and fleshed out, the third pillar allows you to actively plan your financial future and adapt it to your personal wishes and life circumstances. This allows you to ensure that your pension accrual is fully aligned with your own goals, such as retiring early, realizing big dreams or simply enjoying a comfortable retirement life. But what specifically are the benefits of the personalized retirement plan for employees?

1. You get a tax refund and thus keep more of your hard-earned money

Putting money aside in a bank account basically only costs you money because you have to deal with low interest rates and inflation, and because you have to pay tax on your savings as soon as you exceed the tax-free capital of €57,000 (€114,000 if you have a tax partner). In contrast, saving through the third pillar is fiscally advantageous because the government offers tax breaks to encourage this type of investment and savings. 

The contributions you make to a third-pillar pension product are deductible from your taxable income up to a certain maximum. As a result, you pay less income tax in the year you make the deposit. So you save indirectly during the year. What will you do with that money? Once you get it back you can go on vacation with it. Or you can put it back into your pension where you will get an extra return and the next year you will get back income tax on it. *Ka-chinggggg!* Can you hear that money printer going?

Furthermore, the returns on your invested amount within this retirement plan are generally not taxed as long as the money remains in the plan. This means your assets can grow untaxed, which can lead to a significantly higher pension pot in the long run. Tax is levied when the pension is paid out, but at a lower rate. In fact, retirees pay less tax because specific tax brackets exist for them. Thus, the third pillar offers not only flexibility and control, but also significant tax benefits that contribute to a comfortable old age.

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

One of the key benefits of personalized retirement plans is the transparency and control they provide. Unlike traditional retirement plans, where employees often have no insight into how their pensions are managed or exactly how much they have accrued, a personalized plan gives you complete transparency. You can see at any time how much money is in your retirement pot, how it is invested, and what returns you can expect.

In addition, this form of pension accrual gives you the flexibility to make adjustments based on changes in your life. Whether you get a promotion, want to put a bonus to good use, decide to work less, or have unexpected expenses, you can easily adjust your monthly contributions. This means you can continually tailor your retirement plan to your current financial situation and future goals. This combination of transparency and flexibility not only gives you more control over your retirement, but also ensures that you are better prepared for your financial future.

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

Traditional pension funds can have high costs, mainly because of their complex structures and the many parties involved. All those parties also need to be paid. Also, collective pension funds are often active funds (in English, "Actively Managed Funds") and, that means actively buying and selling stocks, bonds, ETFs by advisers. These also have to be paid. And that, in turn, comes off your return.  

Many personalized retirement plans do that differently. These often use modern technology to reduce costs. Automation requires fewer people to do things like transactions, rebalancing your portfolio based on the market and implementing new investment strategies (not everyone does this, but Vive does). 

Personalized plans rely less on intermediaries and expensive administrators, so costs tend to be lower. This means that more of your money actually goes toward your retirement savings, ultimately leading to a higher pension. In addition, the efficient structure of personalized retirement plans can contribute to better long-term returns, as less money is lost to costs and inefficiencies.

Personalized retirement plans: saving but more advantageous

Personalized retirement accumulation offers clear added value over traditional group schemes and also over self-banking savings. Not only does it offer the flexibility and control you need to tailor your retirement to your own lifestyle and goals, but it also provides significant tax advantages, allowing you to have more left over from your savings. 

Because personalized retirement plans often come with lower costs and more efficient management, more of your money is left over for actually building up your retirement. In essence, personalized retirement accumulation is a smart way of saving that not only ensures a worry-free retirement, but also helps you financially realize your dream retirement. It is a modern, transparent and cost-effective way to secure your financial future, with more benefits than simply saving in a bank account. Whatever dream you have for retirement, you will achieve it with a personalized retirement plan.