Are you, as a director and major shareholder (DMS), accruing a pension under your own management, and do you also have part of your pension insured externally? If so, you may transfer this external pension back to your own management. However, this is only possible in 2016.
Phase-out
In all likelihood, pension accrual under self-administration will end on 1 January 2017. This is part of the measures presented on Prinsjesdag tax plans for 2017.
As a director and major shareholder, you will soon be able to choose from three options:
- to reduce the value of the pension accrued under the self-administered scheme and surrender it with a tax relief;
- writing off and converting the self-administered pension into a retirement benefit obligation;
- maintaining the self-administered pension scheme (also known as making it “contribution-free”; no further accrual is possible).
External pension scheme
Some directors and major shareholders have, in addition to a self-administered pension scheme, also insured part of their pension externally. Now that the self-administered pension scheme is being phased out, this externally insured portion may only be transferred back to a self-administered scheme in 2016. Transferring the pension back means that the insurer pays the surrender value of the part of the pension insured with them into the private limited company (B.V.) in which the self-administered pension is held. This may be advantageous if you wish to reduce the pension in 2017, 2018 or 2019 and subsequently surrender it with the tax relief or convert it into a retirement obligation.
Careful consideration
Withdrawing a portion of your pension held with an external provider requires careful consideration. After all, there was a good reason why you chose to set up an externally insured ‘fund’ for your retirement in the past. By withdrawing it, you are giving that up. You should also bear in mind the cover for your dependants’ entitlements that may be included in the externally held pension.
Furthermore, if you opt for the lump-sum settlement option, the tax relief will not be granted on this portion of the pension that is transferred back to your own management. The tax relief for 2017, 2018 or 2019 is granted only on the tax (balance sheet) value of your pension liability in the private limited company as at 31 December 2015. On that date, the externally insured portion of the pension did not yet form part of this self-administered pension liability.
Finally, in the case of both a lump-sum settlement and the option to convert the pension into income, the pension entitlement is first written down to its tax (balance sheet) value. This write-down therefore also applies to the portion of the pension held with an external insurer that has been transferred back.