Doing Business in the Netherlands 2012 - American Chamber of ...

15.6.6 Average Pay System
In this system, the pension accrual is a fixed percentage of the
pensionable base in the first year as of the commencement date of
employment or the commencement date of the plan. Upon each
consecutive increase of the pensionable base, a pension is accrued
only for years of service yet to come. In this way, the pension to be
distributed on the pension date is calculated on the average of all
pensionable bases over the entire period of participation in the plan.
15.6.7 DC System
Under a DC system, it is not the final pension that is the standard, but
the offered premium that forms the basis of the pension commitment.
Thus, rather than a pension commitment, a premium commitment is
involved. In this system the pension benefit depends on the
contribution paid, the interest percentage and the return on investment.
15.6.8 CDC System
As of 2005, International Financial Reporting Standards (IFRS) for
companies quoted on the stock exchange has led companies to
reconsider their existing DB pension plans. The Project Unit Credit
(PUC) method based on IFRS used, leads to high pension liabilities in
the company books due to the fact that this method takes into account
discount rates, salary increases, periods of service, inflation and other
actuarial factors.
Although most of the companies affected by IFRS do not wish to be
confronted with the high liabilities in the company books, most of
them do wish to keep the advantages of the DB System.
The combination of the two leads to the so-called CDC system. A
CDC pension plan, based on a defined benefit system, might show the
following aspects:
� The employer pays on a yearly basis (within a few years) a
pre-fixed pension premium.
142 Baker & McKenzie