The pension system is a hot topic. Last week, we reported in an article and a factsheet regarding the phasing out of the self-administered director-owner pension (PEB) envisaged by State Secretary for Finance Wiebes. However, the pension system for “ordinary” employees also needs to be revised. In a letter In a letter dated 8 July 2016, Klijnsma, State Secretary for Social Affairs and Employment, outlines the government’s position on this matter.
New pension scheme from 2020
The introduction of a new pension system is, of course, a major undertaking. These are arrangements that will affect almost every Dutch citizen for the greater part of their lives. That is why the Government is taking ample time to draw up well-considered rules and to ensure they are properly enshrined in law. For the time being, the aim is to introduce the new pension system from 2020. In the short term, therefore, pension providers, employers and employees do not yet need to make preparations for the new pension system. In fact, this is not yet possible at all, as so far only the broad outlines of the new system have been set out.
Minor improvements
A number of minor improvements to the current pension system will, however, be implemented in the short term. These improvements are in addition to the “minor” adjustments that the Government has already made recently in anticipation of the changed social and financial circumstances.
- The right to cash out small pension entitlements will be replaced in mid-2017 by a compulsory transfer of the value of these small pensions.
- The Act on the Improved Premium Scheme is expected to come into force on 1 September 2016.
- Communication with members of pension schemes is being improved.
Small pension entitlements
A pension entitlement is considered small if the annual old-age pension payable is less than €453. The pension scheme administrator currently has the legal right to settle such an entitlement. Settlement means that the pension administrator calculates the present value of the entitlement and pays that amount, after deducting income tax, to the pensioner. The logical consequence is that, once the pensionable age has been reached, the pensioner will not receive any payments from this pension entitlement. In order to minimise gaps in retirement provision as far as possible, the right to buy out small pension entitlements will be abolished. Instead, the pension provider is obliged to transfer such entitlements to the employee’s new pension provider.