The new pension system ensures future-proof pensions that are better suited to the current times. As a result, all pension schemes in the Netherlands must be adjusted. In this article we list the changes again for you.
The ‘DC scheme’ will become the standard
The ‘DC scheme’ will soon be the only scheme that may be implemented. 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 more than ten years and are therefore well prepared for the new pension system.
Transition to a fixed pension contribution
In the new pension system, new participants will receive a flat premium percentage of 30% maximum. The premium percentages can now be even higher if a participant falls into a higher age category. The maximum premium percentage is recalibrated every five years and automatically adjusted, unless there are major fluctuations. The scope for making an additional contribution yourself will also be age-independent and the assessment for excessive pension (event assessment) will be abolished.
Existing premium schemes can be continued unchanged for existing participants. In that case, a change is made to one new maximum premium scale, below which the existing scale must remain. When switching to a flat premium system for existing participants, some form of compensation may be required. For you as an employer, this means that you can choose to apply two different premiums. Or you can choose to change completely to the fixed scale. You will then be given 3% extra tax allowance until 31 December 2036, to compensate existing employees.
The rules for survivors’ and orphan’s pensions will be clarified
The surviving dependants’ pension will be more standardised. When an employee changes employer and pension scheme, the new surviving dependants’ pension is therefore more in line with the pension scheme of the previous employer. During an active employment, a maximum of 50% survivor’s pension and 20% orphan’s pension of the salary is covered. There will also be a standard partner definition and a fixed age of 25 years for the orphan’s pension. In addition, the orphan’s pension is always doubled if both parents are deceased (full orphan).
The coverage for surviving relatives after leaving employment is still under discussion. It seems that the entire coverage is continued for three months or longer with unemployment benefits. The participant is entitled to continue the cover for a maximum of three years after leaving employment, whereby the proposal is that the risk premium is withdrawn from the accrued pension capital. However, this proposal is subject to change and is therefore not final.
Accrued rights may continue to exist, they do not have to be deducted from the new scheme or incorporated in any other way. The existing 100% refund also seems to remain possible.
Withdraw 10% of pension capital in a lump sum
On the retirement date, participants are given the option of withdrawing a maximum amount of 10% of their retirement pension in one go. This is called “lump sum”. Certain rules will apply to this.
Transparency is one of the main objectives 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.
When does the Future Pensions Agreement come into effect?
The expected entry into force has changed from 1 January 2023 to 1 July 2023. This means that you may adjust your pension scheme from this date. Your pension scheme must be adjusted before 1 January 2027. Minister Schouten submitted the proposal to the House of Representatives on March 30, 2022. From then on, the political treatment of the law will start. Whether the law will be passed within the expected time frame depends on the members of the House of Representatives and the Senate. Details of the proposal and the expected entry date are subject to change.
What can you expect from us?
We will of course keep you informed of all developments and decisions, because a lot can still change. And we will continue to inform you about the options we offer you to have your pension scheme fully aligned with the Pension Agreement.