With the introduction of the Pension Agreement, the Dutch pensions system will be better suited to the current times and more resilient in the future. This corresponds with major changes. Although not everything is clear, we know one thing for sure: the new agreement will affect almost everyone in the Netherlands.
BeFrank is well prepared
With the implementation of the new system, the DC scheme will become the standard. DC stands for ‘Defined Contribution’. In short, this means that contributions (premium) are fixed. The income (ultimate pension) is not fixed. At BeFrank, we have been providing DC schemes for ten years and are therefore well prepared for the Pension agreement. In the coming weeks and months, we will provide information on pension agreement developments on a regular basis. And what this means to you, as an employer. We have listed the most important changes for you below.
A fixed pension contribution will be implemented
From 2027 at the latest, new participants will move to a flat premium percentage of 30%. Premium percentages could be higher if you fall into a higher age category. The maximum premium percentage will be recalibrated every five years. The capacity for additional savings will also be age-dependent and the check on excessive pensions (event check) will be removed.
It will be possible for existing premium-based schemes to continue unchanged for existing participants after 2027. They will move into a new maximum graduated contribution scale, within which the existing scale must remain. In the event of a change to a flat premium system for existing participants, a form of compensation will be required. For you, as the employer, this means that you can choose to apply two different premiums. Or you can choose to change to the fixed scale. You will then be given 3% extra tax allowance untill 31-12-2026, to compensate existing employees.
Variable pension benefits will become the new standard
In contrast to the current situation, a pension scheme will soon allow the reduction to a variable benefit payment. In this case, variable means that some of the pension benefits are invested even after retirement (and can therefore vary depending on the returns). Variable pension benefits will become the new standard across the whole pensions system. The participant may always deviate from this standard. Providers must examine the risk-ratio for the participants and adapt the standard to this. The actual duty of care regarding choices and the role of the parties concerned must still be developed further.
Withdraw 10% of pension capital in a lump sum
From 2023, participants will be given the option to withdraw a maximum amount of 10% from their retirement pension on their retirement date, in one go; this is called a lump sum. Certain rules will apply to this.
The rules for partner’s and orphan’s pension will be clarified
The surviving dependants’ pension will be standardised. During an active period of employment, a maximum of 50% of the partner’s pension and 20% of the orphan’s pension will be covered by the salary. There will also be a standard partner definition and a fixed final age of 25 for the orphan’s pension. The orphan’s pension will be doubled if both parents die (full orphan).
The entire cover will be extended by three months or longer if there is a WW (unemployment) benefit. The participant will be entitled to continue the cover for a maximum of three years after termination of your employment, with the proposal that the risk premium will be deducted from the accumulated pension capital. The precise details of the cover for surviving dependants after termination of your employment may change as discussions are ongoing. Accumulated entitlements may be retained; these do not have to be reduced in the new scheme or incorporated in any way. The existing 100% restitution will also probably remain.
Transparency is one of the main aims of the Pension Agreement. Prescribed formats, such as the UPO and Pensioen123 will be eliminated. There will be additional responsibilities for the pension administrator. They will have to do all they can to guide participants in a suitable and appropriate manner when choices are being made. BeFrank has been providing clear communication for the past ten years. Our mission is to bring pensions closer to participants. And we will carry on doing so. Participants were informed in the autumn via our newsletter about the consequences of the Pension Agreement. And recently we launched a video for participants in which BeFrank colleague Laurenzo explains the Pension Agreement in less than 2 minutes.
What can you expect from us?
At the moment, this legislative proposal is at a preliminary stage; implementation is planned between 2023 and 2027. Details of the proposal could still change. We will keep you updated. From now on, we will provide more information about developments and options that we are offering in order to ensure your pension scheme matches the Pension Agreement. You can always talk to an adviser. Any questions? Please feel free to contact us. We’ll be happy to tell you more!