The Netherlands pension reform was initiated in 2019 to change the structure of pension accrual. On July 4, 2020, the largest workers trade union (FNV) approved a new pension system in the Netherlands. Effective dates are January 1, 2021 – January 1, 2026. Changes to the system, and how the new system will work, are outlined below.
Defined benefit schemes disappear
In the new system, it is always the pension contribution that is the starting point for pension accrual and not the benefit. The pension contribution is the same for all ages (flat rate). The maximum contribution will be published later on, and is expected to be between 30% and 33% of the pensionable earnings.
Emphasis is on contribution
In the new system the emphasis is less on security and guarantees. Instead of a pension benefit, there is a pension expectation. This is a major change for employees who are now participating in a pension plan based on a defined benefit. Under the new system, the contribution is the same for all ages. Existing defined contribution plans with an age-related premium scale may be continued for current employees. The flat defined contribution will apply to new employees.
10% received as a lump sum payment
As of the employee’s retirement date the lifelong payment of a retirement and partner pension is purchased using the accrued capital. Under the new system employees are allowed to receive 10% of the accrued capital as a lump sum payment.
State retirement age is 67
The state retirement age will increase less rapidly. In 2024 the state retirement age is 67 and it is announced that this will remain age 67 in 2025.
Introduction of early retirement options
In 2006, the Dutch government installed a new law on pensions and early retirement. Early retirement schemes were no longer treated under a fiscally favorable system. Under the new plans, (called Vertrekregeling) employees are allowed to stop working earlier without the employer being charged a fine. Under these conditions employees are allowed to retire three years before they reach the state retirement age.
The maximum survivor’s pension that can be insured has increased.
The Dutch government expects the implementation details to be finalized in 2020, followed by draft legislation in 2021 and formal implementation in 2022, with a transition period from 2022 to 2026:
- January 1, 2021: introduction of early retirement scheme and 10%-lump-sum-payment on retirement date
- January 1, 2022: pension agreement has been translated into legislation, start transition period to the new pension system;
- January 1, 2026: deadline for switching to the new pension system.