The Ministry of Social Affairs and Employment has submitted the draft Lump-Sum Payment, RVU and Leave Savings Act for internet consultation. If this law is introduced, pensioners will be offered more choices.
Lump sum
It will be possible to choose to allocate part of your pension to be taken in one go. The following conditions are proposed for this:
- You may withdraw a maximum of 10% of the value of your old-age pension entitlement in a lump sum (if you take partial retirement, the part-time factor must be applied);
- this must take place when you start receiving your old-age pension;
- if your pension scheme includes a high/low structure, you must not apply it;
- And, of course, once you have taken the money out, your old-age pension must still exceed the surrender limit (for 2019, the surrender limit is set at an annual old-age pension of €484.09).
In the third pillar as well
It is proposed that, in the third pillar (annuity products) too, it should be possible to pay out a lump sum of up to 10% of the product’s value on the date payments commence.
The option to surrender the policy should also apply to net pensions (second pillar) and net annuities (third pillar).
Taxed
Naturally, the lump-sum payments are subject to standard payroll and/or income tax. However, as this is an authorised surrender, no revision interest is payable (in the case of an unauthorised surrender, 20% revision interest must be paid in addition to the tax).
No intended use
The bill does not specify any mandatory uses for the net amount. The idea is that you could, for example, pay off the mortgage on your home (or other debts), but you are free to use the net lump sum as you see fit.
Retiring early
For some time now, schemes that enable employees to retire before reaching retirement age have been discouraged by a levy of 52%. This levy is paid by the employer and is – naturally – in addition to the standard tax due. This is also known as the RVU levy, where RVU stands for Early Retirement Scheme.
The RVU levy will be temporarily relaxed for a period of five years (2021 to 2025 inclusive). Employers may, without being liable for the RVU levy, pay employees an amount equal to the net state pension (AOW) benefit. The employer may do so for a maximum of 36 months prior to the employee reaching state pension age.
Accumulating leave in excess of statutory entitlement
A third relaxation concerns the extension of the tax-related option to accrue leave in excess of statutory entitlements. Employees are currently allowed to accumulate a maximum of 50 weeks’ of leave in excess of statutory entitlement or compensatory leave. This is being extended to 100 weeks. It must be possible to take the accumulated leave at any time during the employee’s career.
Proposed effective dates
The aim is to extend the RVU scheme and the leave savings scheme as of 1 January 2021 bring into force. The option to receive a lump-sum payment of 10% from the pension would, as of 1 January 2022 are due to come into force.