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PPI explained

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New pension institution

Since 1 January 2011, it has been possible to place collective pension schemes with a Premie Pensioen Instelling or PPI (the Dutch defined-contribution vehicle established in compliance with the European Pension Funds Directive on Institutions for Occupational Retirement Provision [IORP]). The PPI has extended the range of options open to employers – the PPI is a new type of provider, supplementing insurance companies and pension funds.
 
The PPI is a product resulting from the European Pension Directive and was designed especially to make it possible to implement international pension schemes from the Netherlands.  
 
Executor of defined-contribution schemes
A PPI is highly suited to the implementation of defined-contribution schemes with a fixed and stable premium.
 
While PPIs are prevented by law from bearing biometric risks (such as longevity or disability risks) and may not give guarantees on the amount of capital or the value of the benefit to be accrued, they may offer pension schemes that cover this kind of risk as long as the risks are borne by other parties (e.g. an insurance company).   
 
Pension accrual phase
The employer deposits premiums in the PPI in order to accrue pension capital during the period in which an employee is under contract to an employer. These premiums are deposited in the participants’ individual investment accounts.
 
In a PPI, the focus is on the accrual phase of the pension capital. On the retirement date, the PPI transfers the accrued pension capital to the insurance company or pension fund selected by the participant, which then purchases a life-long retirement pension (and partner pension, if required) with this capital. The pension provider then periodically pays out a pension to the retiree (or dependent). 
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