Retrieved from 16 March We previously informed you of the announcement by State Secretary for Finance Wiebes that self-administered pensions were to be abolished. The intention was (is?) for this to come into effect on 1 January 2017. And in order to achieve this, the decision needed to be followed up swiftly. Instead of the detailed proposals for possible solutions promised within a few weeks, Wiebes informed the House in a letter dated 31 May 2016 that he will announce his final decision on the course of action to be taken no later than the summer recess (he does not specify a year, but is probably referring to the summer recess of 2016).
Will putting it off mean it’s off?
We wonder whether this (yet another) delay will ultimately lead to the plans to abolish self-administered pensions being shelved. In itself, we believe there is a case to be made for this, given the complications that still need to be resolved. This concerns, in particular, the issue surrounding the position of the partner. Under the Pension Rights Equalisation Act, the partner will have to agree to the pension entitlement being bought out or converted into a self-administered retirement savings scheme. However, it is reasonable to assume that many partners of directors and major shareholders will not wish to relinquish their rights.
Doubts
There are also serious doubts as to whether the proposed voluntary buy-out scheme, under which only 70% (there are rumours that this will be 60%) of the payroll tax due on the surrender of self-administered pension entitlements actually has to be paid (and the 20% revision interest is not calculated) will in fact be utilised by many taxpayers in practice. Even then, however, in many cases a very substantial amount of tax will still have to be paid, meaning it cannot be ruled out that many directors and major shareholders (DGA’s), whether or not compelled by the financial situation of the private limited company, will nevertheless opt to pay payroll tax on the periodic pension payments.
Has self-management been put on hold?
The biggest problems lie in the transitional arrangements: what should be done about the pension entitlements already accrued? The State Secretary could also choose, for the time being, to end the option of accruing (further) pension under self-administration, whilst allowing existing entitlements to stand (freezing the in-house pension scheme and permitting further pension accrual only through a recognised insurer). However, this would mean that the original aim of the whole operation would not be achieved. After all, during the recent economic crisis, it was found that many private limited companies were unable to pay out dividends due to the higher (commercial) valuation of self-administered pension entitlements. By unlocking the pension capital, the aim was, on the one hand, to generate additional tax revenue on dividends and, on the other, to create scope for consumer spending deemed necessary to stimulate the economy.