New pension system through
Future Pensions Act

As people’s life expectancy continues to rise, the current pension system is no longer always adequate. The government has therefore reached a pension agreement together with employees’ and employers’ organisations. This includes agreements on the state pension and any pension schemes. Ultimately, the pension agreement leads to a new pension system and all pension schemes need to be adjusted by 2027. What does this mean for you as an employer? It depends on whether you participate in a pension scheme with an industry pension, insurance provider or premium pension institution. Here we explain the consequences of the changes for you.

What will remain the same about the pension system?

Under the new system, we will continue to save for a lifelong pension. In such a pension, the risks of old age, death and disability are shared between the employee and the employer. Joint administration of pension schemes and a joint investment policy will also remain in place. The current, compulsory pension accrual in certain business sectors will continue to run through you as the employer.

What will the changes to the pension system mean for you as an employer?

• Abolishing career-average and final salary pension schemes

Committing to a career-average and final salary scheme will no longer be allowed from 2027. From 2027, equal contribution will be the starting point.

• Pension moves with the economy

You and your employee will continue to set aside money together for retirement. A small portion of the contributions deposited is set aside for setbacks. When the economy is doing badly, pensions go down at a slower rate. When the economy is doing well, pensions go up ‘earlier’. This makes pensions more mobile. Contributions remain the same and will not fluctuate. The younger your employee is, the more their pension capital will fluctuate. This is because young employees are in fact relatively more at risk than older employees.

• Annual pension estimate

Everyone will be able to see the amount available for their pension from 2027. In addition, an estimate of the pension they can expect will be made every year from 2027 onwards.

• Lump-sum payment on retirement from 1 July 2023

Employees can have a lump-sum pension amount (up to 10% of accrued pension capitals) paid out upon retirement.

Please note: This may have tax implications.

• State pension entry age rises less rapidly

The state pension age has already been fixed at 66 years and four months for two years. In 2024, the state pension age will rise to 67. And from 2025, the state pension age will rise not by 1 year for every year we live, but by eight months. This could mean that you may have employees who retire earlier than you had thought.

Mandatory pension scheme with industry pension fund, insurance provider or premium pension institution?

Many sectors in the Netherlands have compulsory pension schemes. If your business activities fall within the scope of the pension fund, in consultation with trade unions and others, your pension scheme will be adapted by the pension fund to comply with the new pension system.

If you are not covered by a mandatory pension scheme, you will have to adjust your pension scheme yourself. It is a good idea to inform your employees in advance about what changes will apply to their pension scheme. Based on a transitional regulation, certain existing pension schemes can continue beyond 1 January 2027.

If you want to understand the possible choices and implications of the changes for your existing pension scheme yourself, you can, for example, have a certified pension adviser prepare an impact analysis for you. This will give you, as an employer, insight into how the different options affect the costs for you and the pension outcome for your employees.

Pension impact analysis

Taking advantage of the transitional regulation seems the wisest option, but this is not necessarily the best option for every employer. The transitional regulation means that existing tiered contribution schemes for current employees may be maintained after 31 December 2026. Career-average pension schemes in place on 31 December 2022 must be converted to a tiered contribution scheme by 31 December 2026 in order to benefit from the transitional regulation.  In consultation with your employees, you can determine whether or not to make use of the transitional regulation.

However, it is important for your business that the decision of whether or not to use the transitional regulation is well-considered and well-founded. There may be several reasons why switching to a fixed contribution scheme for current and new employees may or may not be of interest to your company, such as:

• No difference between employees, everyone has the same obligation.
• Predictable and equal pension costs.
• You already comply with the new legislation.
• Maintain labour mobility of older employees.

Three scenarios for level of contribution rate

If you want to determine how high the fixed contribution rate should be, you must first set the pension policy for the future. There are three scenarios you can choose, with a matching fixed contribution rate to be calculated:

• Maintain the ambition level of the current pension scheme.

Your employees should not lose out in terms of pension benefits to be accrued.

• Pension outcomes comparable to the current pension scheme.

Your employees should not lose out on pension capital to be accrued.

• Maintain the current cost levels.

You want to keep pension costs the same and switch to a fixed contribution rate with a neutral budget. Here, it is also important to look at the impact on employees’ outcomes upon retirement.

Your impact analysis should also take into account other features of your business, e.g. the current average age of your workforce combined with hiring policies, average working hours, expected growth and development of the business. This may ultimately be decisive in deciding whether or not to make use of the transitional regulation and the right time to start the new pension scheme.