Parts of the Dutch Pension Agreement have been postponed. What now?
Recently the Dutch government decided to postpone the introduction of the most important law that regulates the change of the Dutch pension system (pensioenakkoord) by one year. In this pension note we will shortly take you through the specifics of this law to be and what postponing it could mean for employers in the Netherlands.
Specifics of the postponed law
New laws resulting from the National Pension Agreement of 2019 are postponed and now should take effect only as from 2023 instead of 2022. Starting point is an age independent defined contribution scheme (one flat rate premium). Currently most of the pension schemes in the Netherlands are age depending defined benefit schemes, especially when an industry-wide pension fund applies.
As of 2023 the maximum age independent annual premium for tax purposes will be 30%. Almost all existing pension schemes will have to be changed. All kinds of consultation obligations apply to changing a pension scheme. Consent must be requested from, among others, trade unions, Works Council and individual employees . The renewal of the system also raises compensation issues and transitional entitlements for existing participants. In addition, a new kind of pension scheme is being introduced for pension funds only. Furthermore, employees will have the option to withdraw a lump-sum amount of a maximum of 10% on retirement date. Finally, the way in which the partner's pension is insured will be changed and standardized.
Points of attention for employers in the Netherlands in 2021 and further
When setting up new pension schemes or changing existing ones, it is important to take the current and future laws resulting from the National Pension Agreement into account as much as possible. By doing this risks, surprises and unnecessary costs can be prevented. Many new pension schemes already are based on an age independent pension premium, which is already allowed for tax and legal purposes. Note that an employer´s contribution lower than approximately 8% of the yearly salary actually in principle will not lead to a sufficient pension benefit for the employee.
If a pension scheme at an insurance company has an age dependent pension premium table and therefore does not comply with the new legislation, employers can apply transitional law. This transitional law regulates that the scheme can be continued for employees who were already employed. The period in which you can make use of the transitional law most likely ends in 2027. For new employees, a pension scheme based on a flat rate should be implemented anyway. If an employer elects to apply transitional law for existing employees, than two pension schemes will be in place.
Postponement of the new law and the transitional law do not mean that not acting is the most sensible thing to do. Employers who have their pension scheme administered by an insurance company would do well to already investigate whether an earlier switch to a flat premium is beneficial for employer, employee as well as recruitment purposes. If the pension scheme is administered by a mandatory industry-wide pension fund, the employer will have to wait for the changes to be made at industry level.
For more information about the current situation in the Netherlands we refer to our brochure Pensions and insurable benefits in the Netherlands.
11 June 2021