Update Pension Legislation
The pension system in The Netherlands is changing in many aspects. The changes are set out below in chronological order.
Wet VAP 2014
As of 1 January 2014 the Wet VAP (Wet Verhoging AOW- en Pensioenrichtleeftijd – Raising of the State Pension and Retirement Age Act) has led to austerity in the fiscal framework for accruing pension via the employer. The maximum accrual rates for State pension have been reduced. As a result of this the maximum for survivors’ pension was also reduced. In addition the retirement age has been increased from 65 to 67 years.
The Wet VAP will be followed by a new adjustment for pension insurance. The Senate has taken the decision that the following changes will be implemented.
The maximum accrual rates will again be reduced. This is all due to the cabinet’s austerity plans. These austerity plans will be achieved by reducing the maximum accrual rates. In fact by curtailing the fiscal framework less premium is paid, as a result of which business profits will rise or, if employees are compensated, the pay will rise. In both cases more tax will be paid.
The maximum accrual rate in 2015 will be 1.875% for average pay schemes (middelloonregelingen) and 1.657% for final pay schemes (eindloonregelingen). In addition the maximum salary on which pension is accrued will be 100,000 Euro.
The new starting point is that in a pension scheme via the employer in 40 years 75% of the average pay is accrued;
Consequences for employers
Obviously it is not expected that employees will be compensated for any savings in the pension premiums/reduction in the pension accrual. Pension charges have risen continually in recent years because interest rates are low and life expectancy has increased. Employers are not legally obliged to compensate for this. It is however a statutory requirement to obtain the agreement of employees and their partners, if any. This is after all about taking into account a deterioration in conditions of employment.
Employers’ costs for pension schemes are expected to fall by some 10 to 15%. To compensate for this employers can reduce AOW-franchise or pay pension compensation.
Consequences for employees with an income above 100,000 Euro
Saving for a pension for employees with an income above 100,000 Euro will continue to be possible, but that will then be possible in a net savings alternative that will be exempted in box 3.
An important consequence of the 100,000 Euro maximum limit is that the survivors’ pension for this group of employees will decline
Role of MontClair
MontClair advises employers to future-proof their policy. The amount of 100,000 is expected to be reduced further, ultimately to result in the limit on which social insurance contributions are based (SV-loon). As a result more and more people will fall above the maximum limit. Furthermore a careful look will have to be taken at how the cover for survivors’ pension must be adjusted.
MontClair has developed step-by-step guidelines for dealing with the changes:
- a newsletter,
- comprehensive information letter with employee announcement,
- targeted info with step-by-step guidelines,
- a seminar at which the changes are explained,
- adjustment of insurer proposal,
- communication aimed at employees.
Interested in support from the MontClair pension team?
Please contact us, we will be happy to assist you.
Patricia E. Schellen
Director Employee Benefits
1213 PK Hilversum
T +31 (0)35 52 86 129
F +31 (0)35 52 86 121
M +31 (0)65 19 17 813