The bill is due to be introduced in March Future Pensions Act submitted to Parliament. This bill also contains new tax rules for retirement provisions.
Limits on pension accrual
The most significant change is that, for tax purposes, pension accrual is no longer capped at the amount of the benefit but at the contribution. The proposed contribution cap means that the premium the maximum amount for the retirement pension and the partner’s pension is: 30% of the pension base. The current pension rules are based on a maximum amount that can be accrued benefit: the maximum old-age pension that can be accrued over 40 years of service is 70% of the pension base.
The pension base is the annual salary, less the expected state pension (AOW) benefit (known as the AOW allowance).
Other pillars
Pension entitlements are accrued under Pillar 2 of the pension scheme, taking into account the statutory entitlements covered by Pillar 1. Pillar 1 applies to everyone living in the Netherlands. Only employees are eligible for Pillar 2.
Pillar 3 offers every Dutch citizen the opportunity to build up tax-efficient retirement provisions. Self-employed people cannot make use of Pillar 2 and are therefore almost entirely reliant on Pillar 3. Employees can build up supplementary retirement savings under Pillar 3. Pillar 3 usually involves annuity insurance policies or annuity savings products offered by banks.
Space
It is proposed that the annual allowance for the deduction of premiums or contributions towards an annuity be brought into line with Pillar 2. This means that the maximum premium allowance will be increased from the current 13.3% to 30%. These percentages are calculated on the basis of the contribution base.
If the annual allowance is not utilised, or not fully utilised, in a given year, it may still be utilised over the following seven years (reserve allowance). The maximum amount of the reserve allowance is increased to €38,000 per year. At present, a maximum of 17% of the contribution base or €7,587 (in the 10 years prior to state pension age: €14,978) may be deducted annually from the carry-forward allowance.
As mentioned, Pillar 3 serves as a supplement to Pillar 2 for employees. At present, the pension accrued under Pillar 2 is taken into account in Pillar 3 via the so-called ‘factor A’. Under the new system, the maximum contribution that can be paid into Pillar 3 must be reduced by the amount already contributed to Pillar 2.
Entrance
Recently, the Amendment Memorandum on the bill tabled in the House of Representatives, but it does not contain any substantive amendments regarding the matters described above. The Future Pensions Act is due to come into force on 1 January 2023. Pension providers will then have until 1 January 2027 to bring their schemes into line with the new legislation.