Update Dutch Pension Agreement
The Dutch Pension Agreement was presented in June 2019. The details of this agreement in principle were further elaborated in the past year. The government has now reached agreement with the unions and employers on this. CNV's union members have now agreed. The FNV union members will vote on this later. What are the main issues and what are the consequences for you as an employer? In this article we have listed a number of these issues for you.
Phased transition
The transition to the new pension system will take place in phases between 2022 and 2026. So there will be no hard transition in which everyone will switch to the new pension system at the same time.
Premium as base
In the new pension system, the premium will be the base. This premium (percentage) is fixed and ensures that pensionscosts are no longer volatile with the economy. All pension plans must be adjusted accordingly. This has major consequences for pension funds in particular. Until now, these pension plans often provide a guaranteed level of pension benefits. This obligation is now released. In practice, this means that the contribution has been fixed, but the amount of the benefit payment is uncertain.
If you already have a defined contribution plan
Even if you already have an defined contribution plan, things will change. In the new system, there is a fixed premium that no longer depends on age. With an equal income, a person of 25 years accrues a higher pension than someone of 60 years old. This has major consequences for older workers in particular, the so-called 'bad luck generations'. Think of the creation of a pension gap for the older workers and bringing forward the total pension costs for the employer. There is no buffer within the currently defined contribution plans to absorb these costs.
Compensation for existing schemes
As compensation, it has now been agreed within the Pension Agreement that employers who already have a defined contribution plan may have two plans side by side. They may keep the existing age-dependent defined contribution table for current employees. The new plan will apply to new employees. Employers will therefore pay an age-independent fixed premium for new employees. The current employees under the old plan will not have to be compensated.
Error in new pension agreement
This seems a nice solution to avoid high compensation costs. However, this will create inequality. After all, employees of the same age are promised different pension contributions under the current and new plan. The Dutch Association of Insurers calls this an ‘error’ in the new pension agreement. The Association therefore wants companies with defined contribution plans that are placed with insurers to be able to maintain the current defined contribution tables for both current and future employees. And that they can choose themselves when they switch to the new system.
What does this mean for you?
The new measures, but also the matching timelines, are becoming increasingly concrete. As an employer it is therefore important that you start looking at your current pension plan now. There is a good chance that you will have to adjust your pension plan. This requires the approval of the Works Council (if present) and of the participants. Good and timely communication with your employee and possibly Works Council is therefore essential. We are happy to help you with this!
More information
Would you like more information about the developments in pensions in The Netherlands? Then take a look at vanbredanl.com/pension developments. Here we will keep you informed about the most important developments. As your advisor, we will of course also contact you personally in the coming period. We will work with you to determine whether your existing plan needs to be adjusted and how the best approach will be. Do you want direct contact? You can contact our pension advisers on telephone number 088 - 273 32 70. Or send an email to pensioenteam@vanbredanl.com. We are happy to help you!