A letter arrives from the insurer at your policy anniversary, proposing a premium increase, typically in line with inflation. Many people find it annoying – yet indexation isn't a trick, it's a tool for keeping value on track. The right question isn't 'why do they want more' – it's: what is my pension goal worth if the premium stays the same for ten years?
- Indexation is an anniversary premium increase, typically matching inflation – its purpose is to keep the real value of your savings from eroding.
- Accepting it is typically not compulsory – but skipping it repeatedly is a quiet shrinking of your pension goal.
- Decision factors: how much of the credit cap you're using, how your income is developing, and the bonus conditions.
Why does indexation exist?
Your pension goal is distant, and inflation works against it year after year: what looks like an adequate monthly premium today will, in real terms, be worth considerably less in ten years. Indexation offsets this: the premium – and with it your goal – tracks the price level. The insurer sends a proposal at each anniversary; under the typical rule, you decide whether to accept it.
The proposed rate differs by product and by year – so the anniversary letter isn't a template annoyance, it's a once-a-year decision point that deserves five minutes (the on-request review).
When is it worth accepting?
- If your income is roughly keeping pace with inflation – in that case, the higher premium's share of your budget doesn't grow.
- If there's still room in your credit cap: the higher premium can also bring a bigger tax credit (calculating the cap).
- If the bonus conditions are tied to indexation – you need to know this from the policy terms (the bonus article).
Accepting it is, by default, maintaining your pension goal: a 'never increase' strategy quietly shrinks the goal year after year.
When is skipping it justified?
If your income is temporarily tight, skipping it is a sensible release valve – better to skip one year than push the premium to an unsustainable level. If your premium is already above the credit-cap ceiling, indexation won't bring any extra credit – in that case the decision is purely about your savings goal.
What's worth watching: the consequence of repeated skipping isn't immediate, it's cumulative – after five skipped years, the real value of the premium noticeably lags the goal. If you ask for a review, I show this numerically too.
The order of the decision
At each anniversary, three questions are worth asking: can your budget handle the higher premium? Does it bring an extra credit? Does it affect a bonus condition? Based on the answers, the decision typically follows on its own – and it can be made afresh every year: indexation isn't a lifelong vow, it's an annual fine-tuning.
For my clients, on request, I 'translate' the anniversary letter: what the insurer is proposing, what it means for the goal, and what I would do in their shoes – the decision is theirs.
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