New Pension system coming to the Netherlands

 Transition to Defined Contribution Schemes

Under the new system, all occupational pensions will be based on defined contributions. Employers and pension providers must convert existing defined benefit schemes to one of three new types of defined contribution schemes:

• Solidarity contribution scheme

• Flexible contribution scheme

• Contribution-capital scheme (exclusively for pension insurers)

  
  

This transition must be completed by 1 January 2028.

2. Introduction of Flat Contribution Rates

The previous system allowed for age-dependent pension contributions. The new law mandates a uniform (flat) contribution rate, eliminating age-based variations. However, during a transitional period until 2037, employers may continue with age-dependent contributions for existing employees, provided they comply with other aspects of the new legislation. 

3. Personal Pension Pots

Pension funds will no longer promise a specific benefit amount. Instead, each participant will have a personal pension pot, reflecting their individual contributions and the returns on investments. This approach enhances transparency and allows individuals to better understand their retirement savings. 

4. Lowering the Minimum Participation Age

Starting 1 January 2024, the minimum age for participating in a pension scheme is reduced from 21 to 18. This change aims to encourage early retirement savings among young workers. 

5. Compensation for Transition Losses

To address potential disadvantages arising from the transition, the law allows for compensation. Employers and pension providers may set aside additional funds to ensure that employees do not lose accrued pension rights during the conversion process. 

6. Enhanced Survivor's Pensions

The new legislation standardises survivor's pensions, ensuring that partner pensions paid after retirement do not exceed 70% of the deceased's retirement benefits. For deaths before retirement, partner pensions are risk-based and capped at 50% of the pensionable salary. Additionally, orphan's pensions are adjusted to a maximum of 20% of the pensionable salary, with full orphans receiving up to 40%.

Implementation Timeline

• 1 July 2023: The Future Pensions Act came into effect.

• 1 January 2024: Minimum participation age lowered to 18.

• 1 January 2025: Employers must submit amended pension agreements and transition plans to pension funds.

• 1 July 2025: Pension funds must submit implementation and communication plans to regulators.

• 1 October 2026: Employers affiliated with insurers or Premium Pension Institutions (PPIs) must submit amended agreements and transition plans.

• 1 January 2028: All pension schemes must fully comply with the new system. 

The new pension act will change a lot for the traditional Pension participants. However there are still some discussions in the Dutch parlment about the different options in the new system one of them being opt out.