The Future of Pensions Act (Wet toekomst pensioenen) and the adjustments required under that Act will affect not just employers, but in many cases also works council members. What is in store for you and what preparations can you make? BeFrank gives some useful tips.
For the average Dutchman, retirement may be advanced mathematics, but for Harmke van Gent the subject is cut-and-dried. After all, she has been involved “in pensions” all her working life. Nowadays, she is a pension administrator at the online pension provider BeFrank, where she is also a member of the works council. That combination makes her the person of choice for tips for Works Council members in the transition to the new pension system.
Under the new system, the average and final pay pension schemes (where the level of pension benefits is fixed) give way to a contribution scheme. With a fixed pension contribution that is the same for every age group. The surviving dependants’ pension will also be regulated differently. It now varies by scheme. Soon it will be a fixed percentage of salary and the partner definition will be the same everywhere.
What scheme do we have?
‘That may sound like a logical question,’ says Van Gent. ‘But it is essential to start with, because it determines what your role as a works council is and whether there are rights of consent.’ Pension schemes placed with an industry-wide pension fund are not subject to the right of consent. It also does not include pension schemes that are regulated in detail by a collective bargaining agreement. When an employer has its own company pension fund or enters into a scheme with an insurer or so-called premium pension institution (PPI), the works council usually has the right of consent.
‘But take note,’ says Van Gent. ‘Even when the pension scheme is negotiated at a higher level, you as a works council can still discuss voluntary supplementary schemes with your employer. Such as an top-up or net scheme. You can bring that in as an option to be an attractive employer. Especially in this time of labour market scarcity.’
Create a roadmap
The new pension law (Future of Pensions Act) requires the transition to be completed by 2027. The exact date is still being debated. ‘That may still seem a long way off,’ says Van Gent. ‘But for an insured scheme, the new scheme and its implementation must be agreed by October 2026.’ By that date, a transition plan must be ready, as it is called in the new law.
Three quarters of works councils are not yet concerned with the new pension system, Van Gent noted when a survey was conducted at a SER seminar. ‘So my main tip is: take your time. Take stock of how much time it takes in the organisation and schedule it. We ourselves have set up a project group at BeFrank, from which we ask additional people from the organisation to think along and help. It is also wise to engage a pension adviser. Reserve time in advance because pension advisers will soon be very busy.
A next step is to see when the pension contract expires. Maybe that will be as early as next year. Then the choice is whether to extend the contract for another year or to already pre-empt the new arrangement. In the latter case, as a works council, you have to get to work right away.’
Make sure you are well informed as a works council, advises pension coach Harmke van Gent. ‘Sign up for webinars and seminars and follow pension administrators and pension advisers on LinkedIn. A useful website where everything is clearly explained is Werkenaanonspensioen.nl. Useful is the section specifically for Works Councils, which includes step-by-step plans for each type of scheme. If you follow the flowchart, you will automatically arrive at the roadmap that suits your organisation. ‘Store the information gathered in a knowledge base, which all works-council members can access, so you have everything conveniently together.’
What is the pension ambition?
According to Van Gent, the transition to a new scheme is a good time to revisit the old pension ambition. Questions you can ask include what the level of the current pension scheme is. Is it market-based? What about accrual, coverage, and employee contribution? Next, an important question is: do we still stand by that pension ambition? Do we want to build on that or should we do it differently?’
When it comes to an insured scheme, the employer and works council face important choices, says Van Gent. For example, an employer can take advantage of the transitional arrangement. ‘Then you leave the current pension scheme in place and launch a new scheme alongside it for the new employees. The alternative is for all employees to move to the new scheme. In the latter case, compensation is involved and the question is what such a compensation scheme will look like.’
One choice that is particularly important for pension funds is the type of contract. With the solidarity contract, the investment choice is fixed and there is a compulsory solidarity reserve. A flexible contract gives employees more freedom. Another important question is how high any employee’s own contribution will be. And what the level of the partner’s pension will be, as the surviving dependants’ pension is also taken up in the new scheme. Social partners are in the lead here. However, it is wise to draw up the points you need to consider as a works council at an early stage. A pension adviser can help you with this.
Want to get a rough estimate in advance? ‘BeFrank has developed a nice selection tool for its employers for this purpose in view of the new law,’ says Van Gent. ‘With that, you can very easily see the impact of certain choices. You can always ask your employer if you can look into this together.’
Which pension administrator
At a later stage, the choice of pension administrator will come up. Fees and risk coverage are important here. But other factors also come into play, in Van Gent’s experience. ‘How is there communication with employees; is there anywhere they can go with questions? How user-friendly are the portals? For some organisations, the topic of sustainability is important, for instance. For them, the deciding factor may be whether there are sustainable investment options. The works council also has the right of consent when choosing the pension administrator.’
Inform the constituency
Finally, it is important to think about communication with the constituency from the start. How will they be informed, via the internet or will meetings be called? What are the implications for individual workers? Are older workers offered pension talks? You can present choices to the constituency through a survey. With this, you can also gauge how important employees consider the pension as a condition of employment compared to the other conditions of employment. One website that explains the new pension system to a wide audience is Onsnieuwepensioen.nl, a useful website to share with the constituency.
This article appeared on 27 October on ORnet.