The Dutch pension system will be reformed in the period up to 1 January 2028 so that it is more in line with today's labour market and becomes more personal and flexible. It also becomes more explainable and honest about the degree of certainty that is offered. Existing strengths will be retained, such as collective investment and sharing risks.
The new rules took effect on 1 July 2023. Representatives of employers and employees and pension administrators have until 1 January 2028 to adapt pension schemes to the new rules.
The most important change is that soon everyone who accrues pension will do so in a defined contribution scheme. In a contribution scheme, it is determined how much money (contribution) the employee and employer contribute. A large proportion of the more than 1.5 million participants and 65,000 employers who have placed their pension scheme with an insurer or premium pension institution have already switched to a defined contribution scheme in recent years. As a result, the new rules are less drastic for premium pension institutions and insurers. With their experience and low costs, they are perfectly capable of helping employers modernise their pension schemes.
You can find more information about the new rules on www.onsnieuwepensioen.nl and www.werkenaanonspensioen.nl .
Insurers and premium pension institutions (PPIs) administer pension schemes for approximately 1.5 million employees of approximately 65,000 companies. Most of these schemes are so-called defined contribution schemes, in which collective investments are made and risks are shared jointly. The pension result depends on the contribution paid and the investment results achieved. Not only insurers and PPIs have such a scheme, many company pension funds also have such a contribution scheme for their staff. Insurers also implement contracts that provide hard guarantees for the pension, so-called 'Defined benefit' schemes. However, the new pension rules mean that from 1 January 2028, all pension accrual must take place in a defined contribution scheme. From that moment on, accruing pension in 'Defined benefit' schemes will no longer be possible.
The Dutch Association of Insurers is very much in favour of modernising the pension system for all parties involved. For years, the Association has been arguing for a system that is simple, personal and flexible, explainable and solidary and honest about the degree of certainty. It must also be better suited to our labour market. The new pension rules contribute to this. Pensions are becoming more transparent and personal, and pension schemes are more in line with developments in society and the labour market.
The new contract is fairer about the degree of certainty that is offered. Now it is also made clearer for funds that the amount of the pension depends on the contribution and the investment results achieved. Participants will gain more insight into what contribution is being paid in and what their personal pension assets are. The Abolition of the so-called average system has already been welcomed by the Association as a step in the right direction. The biggest disadvantage of the average system is that young people indirectly subsidise older participants, unless they remain employed by the same employer or sector for their entire lives. That system does not fit well with the current labour market where jobs are changed more often.
It has been agreed that the existing contribution schemes can be maintained. In these schemes, the pension accrual is the same for all ages, but the contribution paid for the pension depends on the age. Relatively fewer contributions are paid for young employees, because their contributions can pay off for longer. It is a good thing that this system, which has been working satisfactorily for years, can be maintained. But this agreement does not apply to new staff who are hired: employers must treat every new employee they hire differently from existing staff. From now on, they will have to pay the same contribution for all ages. This causes problems for the employers concerned and for employees.
For employers, this means that they will receive not one but two pension schemes, until all current staff have left or retired. So for an employer with more than 20 employees, that easily covers a period of forty years or more. After all, a staff member who is now 20 years old will not retire for another fifty years. This increases costs and makes pension schemes complex and difficult to explain to their own staff.
Employees at the same company are confronted with different pension plans that are difficult to understand. An employee who changes jobs may incur a significant gap in his pension accrual, because the new rules assume that the same contribution has been paid over the entire career. This makes it unattractive to switch to another employer, even if they have the same contribution scheme as the old employer. After all, when you change jobs, you are considered a new employee.
The Association advocates an approach in which the current contribution schemes can continue unchanged and in which employers/employees can make their own choice whether they collectively switch to a new contract or allow the two systems to coexist. In the latter case, new employees can also join the old scheme. Because this approach continues to allow two pension systems to coexist, there will be negative consequences for employees who switch from one system to another. Ideally, there will be a scheme with sufficient compensation for employees/employers who are disadvantaged.
Participants can see at any time how much pension they have accrued themselves. But investments are made jointly and risks are shared jointly. In addition, the risk of disability, premature death and the 'risk' of living longer than average and therefore receiving relatively more pension is shared. In this respect, insurers do not differ from funds.
Pension insurers must always have sufficient assets to be able to meet their obligations. Unlike a pension fund, a pension insurer cannot cut back if its assets (solvency) fall below a certain level. If things go wrong, an insurer has to pay extra out of their own pocket.
No. Insured persons have their own policies based on insurance law and their contract. This may not be redistributed in favour of other policies/insureds/policyholders.
In the case of insurers and premium pension institutions, the investment policy takes into account the fact that younger participants may run more risk than older participants who are closer to retirement. As a participant gets older, therefore, investments are made less and less riskily according to so-called lifecycles. Both the equity and interest rate risk are reduced towards the retirement date so that there is more certainty about what the participants can expect at retirement age. Something similar will happen in the new contract that funds will introduce from 2026.
Demographic developments, a changing labour market, economic dynamics and changing customer needs make it necessary to adapt the pension system. The transition to a system with clear, personal pension assets with risk sharing solves a large number of bottlenecks.
The pension schemes will be more understandable for the participant, easier to include in the event of a job change, more resistant to the dynamics of the labour market and offer a basis for more customisation and choices in the future.
Collective organisation of existing solidarity
In a personal pension capital with risk sharing, existing solidarity-based components (such as disability, premature death or longevity) can be organised well collectively. In addition, pension providers will invest for the entire portfolio, leading to diversification, scale and cost advantages. In addition, in the case of personal pension assets, the employer and employees can continue to make agreements about the pension scheme and they can choose within a company which pension provider (general pension fund, premium pension institution, pension fund or insurer) provides the best performance at the lowest cost.
Comparable welfare gains
Similar welfare gains can be achieved in a personal pension capital as in other forms of contract, if the same assumptions are used. Furthermore, the added value of intergenerational risk sharing needs to be nuanced. The welfare effects of pensions that are in line with the personal preferences and circumstances of the individual and of wise choices appear to be greater in many cases than those of risk sharing.
Finally, it is crucial that the transition to a new pension system does not result in any further austerity of the tax framework. This would be a bad start to an already difficult reform and could seriously erode support for reforms.
Read the position paper of the Association on the future of the Dutch pension system.
Keeping up with the times
A few years ago, the Association published the pension vision 'Keeping up with the times; towards a future-proof pension system'. This vision was also based on a study into the needs of consumers (carried out by TNS NIPO). With its vision, the Association wants to contribute to the discussion about the pension system. This can also be expected of insurers, since in addition to individual pension supplements, they also administer about twenty percent of the group pension schemes in the Netherlands.
The variable benefit (continued investment after retirement date) has been made possible through the Improved Defined Contribution Scheme Act. As of 1 January 2018, all pension administrators that offer a fixed and/or variable benefit are legally obliged to use the standard model when communicating this to their participants. The aim is to inform the participant as well as possible about the choice the participant has between a fixed benefit and a variable benefit.
Standard model to help you choose
Before the retirement date, insurers send a largely standardised information document to participants. This is intended to help them choose between a fixed and a variable benefit, and from which provider the participant purchases the benefit she wants. The information describes the consequences and risks of this choice.
The standard model offers the information in layers: main points (layer 1) and explanation of main points (layer 2). The layered set-up comes into its own digitally provided. The Ministry of Social Affairs and Employment has now approved the standard model, see also the publication in the Government Gazette.
This page contains all the underlying documentation about the standard models.
Saving through a savings account in box 3 is less advantageous if saving through an annuity, because the premiums paid are not tax deductible. Many self-employed people appear to be unaware of these and other tax rules and possibilities to save for later. This ignorance has marked the starting point of the Taskforce Income for Later.
The Chamber of Commerce, the Ministry of Social Affairs, Money Wise, the Dutch Self-Employed Persons Foundation, the Dutch Association of Insurers and the NIBUD are participating in the Taskforce.
Structural cooperation
The aim of the structural cooperation is to stimulate the pension accrual of the self-employed and to allow self-employed persons to take actual steps towards building up an old-age provision. The Taskforce does this by proposing solutions in which simplicity and flexibility are central in order to respond to the needs of self-employed people.
Good ideas? Report them to the Taskforce!
The Taskforce is for and with self-employed people. That is why she calls on all self-employed people to come forward with ideas, solutions, but also with bottlenecks and especially things that are needed. Then the Taskforce can get to work!
Mission
'To increase awareness among the broad target group of self-employed people about the usefulness and necessity of building up an income for later and to encourage self-employed people to actually take steps to build up an old-age provision. The Taskforce does this by proposing solutions in which simplicity and flexibility are central.'
Procedure
The Income for Later Taskforce has periodic consultations on three overarching themes:
In certain situations, participants who move abroad or come to the Netherlands from abroad can request to transfer their accrued pension to or from abroad. Since 1 January 2007, the Pensions Act has included a number of provisions in the field of international individual value transfer. A number of these provisions impose obligations on the pension administrator.
To help pension administrators with this, the Dutch Association of Insurers and the Federation of the Dutch Pension Funds, together with their members, drew up the manuals and model questionnaires for International value transfers in 2012. The aim of the manuals and model questionnaires is to increase the practical feasibility of an international value transfer and to simplify the substantive (legal) assessment. The manuals were fully updated and updated in 2022. At the beginning of 2024, the Manual for outgoing international value transfers was amended due to two rulings by the European Court of Justice on 16 November 2023. Both a Dutch and an English version are available.
The process of automatic value transfer of small pensions (WOKP) started on 1 August 2019. From that moment on, pension administrators can automatically transfer all small pensions that arise on or after 1 January 2018. As a result, the pension retains its destination and small pension entitlements are combined into a more full-fledged pension.
Implementation of automatic value transfer
In 2018, in preparation for the process of automatic value transfer, the Dutch Association of Insurers and the Federation of the Dutch Pension Fund drew up a service document and an extensive Q&A (see documents below). The purpose of this service document is to give all pension administrators insight into how they can carry out the automatic value transfer of small pensions. For the process to function properly, it is important that all pension administrators follow the same process.
Clean-up campaign for small pensions from before 01-01-2018
There are also several million small pensions in the pension sector that arose before 2018 and that pension administrators also want to transfer (in part). Legislation stipulates that the Pension Federation and the Association must jointly draw up a plan for the orderly transfer of these small pensions. This plan was published in the Government Gazette on 16 March 2021 and took effect on 1 April 2021. In order to inform the pension administrators about the plan and the way in which administrators can implement the plan, the Pension Federation and the Association have drawn up a second service document.
An addendum to the original plan was published in the Government Gazette on 26 April. In this plan, an additional schedule has been made for the overflow period that belongs to the original plan for the clean-up campaign. The carry-over period is intended for the transfer of the small pre-2018 pensions that could not be carried over as planned in the original plan. The carry-over period starts on 1 May 2023 and runs until November 2023.
The existing Q&A has been supplemented with questions related to the addendum.
Documents
Standardisation of the process of collective value transfer
The process of collective value transfer was not standardised until 2019. Pension administrators used their own procedures and transfer agreements. As a result, collective value transfers were often complex and lengthy processes that did not delight employers, participants or administrators. A solution was found for this in 2019.
In December 2018, during the GMM the members agreed to the collective value transfer protocol. In order to further simplify the process of collective value transfer, a model agreement has been drawn up in addition to the protocol.
This should result in faster procedures, clarity for employers and participants and lower costs for all parties involved.
Updated version of the protocol as of 1 July 2024
In June 2024, during the GMM, the members agreed to an updated version of the collective value transfer protocol.
In response to signals from the Pensions Ombudsman about data quality in collective value transfers, the Life Sector Board considered it desirable to supplement the protocol on a number of points. The aim is to further improve communication with the participant and to make the process clearer and less error-prone. The new version of the protocol can be found here. The passages that are new, or have been changed from the previous version, are shaded in yellow. For more information, see the members' circular that has been published.
For whom?
The collective value transfer protocol concerns generally binding self-regulation and entered into force on 1 January 2019. Initially, the protocol only applied to pension insurers. Other pension administrators may also use the protocol and the model agreement. From 1 July 2024, the protocol will also formally apply to premium pension institutions, which had already applied it in practice before that.
Model agreement for collective value transfer
The model agreement is a standard contract that reflects the agreements made in the protocol and that must be used by the pension insurers and premium pension institutions in the event of collective value transfers. The model agreement offers room to give substance to any specific situations (as a result of current agreements) that are not provided for in the standard contract.
The model agreement has been updated as of March 2023. The model agreement has been amended on the following points:
1. The obligation to provide information
2. Statement on the date of transfer
3. Privacy
4. Textual refinements
Model letter DC-DC value transfers
The Association and Adfiz have collaborated on a model letter for non-complex value transfers between DC schemes. The reason for this is the need in the market to make the process for a value transfer more efficient and to inform the employee more clearly.
An employer who opts for a collective value transfer must carefully inform an employee about the consequences of the value transfer. According to the Pensions Act (art. 83), the employee must be informed about a proposed collective value transfer and be given insight into the consequences thereof. Based on this information, the employee must be able to make a good decision whether or not to object to the value transfer. The use of the model letter (based on requesting and receiving named information from the transferring and receiving pension administrator) contributes to the adequate provision of information to the participant and an efficient design of the value transfer process. The model letter and manual can be found here , under 'Participant letter collective value transfer between two non-complex DC arrangements'.