The Pension Agreement, the main points at a glance
The review of the pension system has been discussed for more than 10 years. In June 2020, the government and social partners reached agreement on its implementation, in the form of the Pension Agreement. But why do we need a new pension system and what are the key points of the Pension Agreement? We will list these for you.
Why a new pension system?
Society is changing: interest rates are falling, life expectancy is rising and we are switching employers more often than in the past. As a result, the cost of the existing pension system has become ever higher. In addition, there is a large discrepancy between the expectation of members of a pension scheme and what they actually receive.
These are just a few developments resulting in the need for a revision of the current pension system. The government and the social partners have therefore looked for a solution that:
- is future proof
- is connected to social developments
- is better aligned to the labour market
- offers greater insight and is more personal and transparent
This solution has been described and laid down in the Pension Agreement.
Key points from the Pension Agreement
Although the details of the Pension Agreement are still being finalised, a number of things are already clear. We will list these for you:
Defined contribution as the point of departure
The defined contribution is the point of departure in the Pension Agreement. This means a switch from a ‘pension entitlement’ to a ‘pension expectation’. Click on the link for an explanation of what will change when the defined contribution is taken as the point of departure.
If you choose to switch to a new scheme for all employees, this may be detrimental to (older) employees. It will probably be necessary to offer compensation to these employees, since a change in the pension commitment can only be implemented if the employees in question are in agreement and give their consent. If they will be disadvantaged, they will only give consent if they receive reasonable compensation.
Statutory retirement age
The statutory retirement age will remain at 67 in 2025 and will not rise to 67 years and 3 months. From now on, a one-year increase in life expectancy will lead to an eight-month increase in the statutory retirement age. That ratio is currently still one-to-one. As a result, the retirement age will also rise less quickly.
Uniform partner’s pension
In addition, the new pension system will simplify the partner’s pension:
- The partner’s pension is a maximum of 50% of the salary (usually 49% of the pension base) and is no longer linked to years of service
- The benefit is for life; the amount of the benefit will be flexible
- Until the retirement date, the partner’s pension is insured on a risk basis. If membership of the pension scheme ends in the intervening period, the partner’s pension is no longer insured. However, in some cases, the partner’s pension will remain (temporarily) insured.
- The orphan’s pension amounts to 20% of the partner’s pension and is paid until the orphan’s 25th year.
Temporary Early Retirement Scheme
From this year onwards, employers will be given the option of offering early pension schemes to employees who have nearly obtained state pension benefits. This scheme allows these employees to retire earlier than before. The employer does not run the risk of a penalty imposed by the Dutch Tax & Customs Administration (‘early retirement scheme penalty’). We will explain the Early Retirement Scheme to you here.
With effect from 1 January 2023, 10% of the pension value can be withdrawn in one lump sum on the retirement date. However, the person receiving the benefit will be required to pay tax on this lump-sum payment.
What does the Pension Agreement mean for the current schemes?
The Pension Agreement has consequences for current schemes. As an employer, you can already take this into account.
If you have a defined benefit agreement
As from 1 January 2026, defined benefit agreements are no longer permitted. These must be converted into a defined contribution agreement in the new system. If the scheme is adjusted before 1 January 2026, they can still be converted into a defined contribution with an age-related contribution for the current members. In addition, it will no longer be possible to establish a new defined benefit agreement with effect from 1 January 2022.
If you have a defined contribution scheme with an age-related contribution
For existing defined contribution schemes with an age-related contribution, the current scheme may be continued however. Members who are included in that scheme before 1 January 2026 may continue to accrue pension benefits based on their age-related contributions for a transitional period to be determined during their employment with the relevant employer. If an employee takes up employment after 1 January 2026 then a new scheme will have to be set up on the basis of the tax legislation in force. This could mean that there are then two pension schemes (the transitional period for existing employees in the old pension scheme and new employees in the new pension scheme).
Would you like to know what is the right thing to do in your situation? Please contact us. Our pension advisers will happily be of assistance.