In June 2019, the government succeeded in concluding a pension agreement with both the employer organisations and the unions.
Much has changed in the Netherlands in recent years. Take the country’s demographics, for example: the population is aging, with about 3.5 million people now drawing a pension. The labour market is also very much in flux, with people switching jobs or setting up their own businesses with increasing frequency. Very few of us still work for the same employer for our entire life. In short, there was a growing need for a pension system in line with these changes and the new pension agreement is intended to achieve this.
The parties involved are still putting the finishing touches to the legislative process to ensure that the agreement is a success. The new rules are expected to enter into force on 1 July 2023. Both employers and employees as well as the pension providers are then given 3.5 years to make the necessary adjustments. One requirement imposed by the new pension agreement is that the pension system has to be more transparent and geared to the individual.
So what is going to change?
There will be five important changes, which we outline below.
Firstly, the state pension age is going to rise at a slower rate. Starting in 2025, the state pension age will increase correspondingly with the rising average life expectancy, rising by eight months instead of one year for every year we live longer after that.
Secondly, the guidelines based on average income and most recent income will no longer apply. Only defined contribution schemes will be allowed, with the employer setting an annual contribution to be used for pension accrual. This will give a clearer picture of what employees are paying in and how much pension they are accumulating.
Another change will be the option for people entering retirement to be paid a lump sum of between one and ten per cent of the total amount of pension he or she has accrued. The use of this money will be discretionary and it may, for example, be put towards a mortgage.
The new pension agreement also provides for a better survivor’s pension and orphan’s pension, which is what surviving dependents and orphans receive after the death of a partner or parent. It is now often quite unclear whether surviving dependants are entitled to this pension, or to what extent. It also depends on the pension scheme itself. The new pension agreement will have to ensure that there are clear rules on this and that surviving dependants are in a better financial position than they are now.
Finally, the new pension agreement provides workers in physically demanding occupations with the option to retire early or in phases. And people in less physically demanding occupations will be given the option to retrain. Here, employers and employees will be able to define “physically demanding occupations” and determine the appropriate scheme for them.
What will this mean for the pension providers?
They’re under a lot of pressure, as they’re expected to ensure that all pension funds transition to the new pension system on time. This will require careful planning and gradual implementation. There is also the question of how all this, as well as what information, will be communicated to pension scheme members. Since more transparency and less complexity are major cornerstones of this new pension system, these communications will have to be very clear about what is going to happen. This will not be made easier by the fact that the new system is quite technical and will therefore be perceived as complex. How will you communicate the requisite information in a transparent manner? Bear in mind, too, that members of pension schemes will have a lot of questions, such as: ‘How much do we have?’, ‘What are we going to get?’ and ‘Is that information correct?’.
What can legal translation agency Fiducia do for you?
As a specialised legal translation agency, we will be happy to be of assistance in providing you with lucid translations in this area. We understand the complex legal agreements that need to be drafted. We will also be happy to help you inform interested parties, properly and transparently, of the changes that are due to come into effect on 1 January 2023.
Want to know how legal translation agency Fiducia can be of service to you? Do get in touch so that we can explore the options together.