The Dutch Parliament and their social partners have reached an agreement on reforming the pension Netherlands system: a future-proof and balanced pension system. The labour market is changing and over the past ten years people have become increasingly flexible in their way of working and living. However, the pension system has remained basically the same. With this agreement in principle, the Dutch retirement provision is being modernised and at the same time, after long discussions (9 years) there is now clarity about the state pension age.
The agreement involves:
- Freeze of the state pension age: the pension age is frozen at 66 years and four months. The retirement age gradually will rise to 67 years in 2024. After that, the state retirement age continues to rise, but less rapidly than the government initially wanted. For each year that life expectancy rises, the state pension age will increase by eight months.
- The option to retire early: For employees born in 1955 to 1961 the option will be available to retire early.
- Abolishment of the Defined Benefit Plans: It will not be allowed to provide the Definied Benefits Plans [middelloonregelingen and eindloonregelingen].
- Prescribing flat rates for Defined Contribution Plans: Under this scheme, the employer makes available an annual contribution, which is spent on the employee’s pension accrual. This concerns an age-independent premium. The premium is more transparent what the amount of the accumulated capital is and how much pension the employee can expect based on this capital. However, the amount of the pension Netherlands benefit is not guaranteed because, in addition to the available contribution, this also depends to a large extent on the investment result.
The new pension Netherlands framework will come into effect January 1, 2023 and there is a transition period for pension providers is up to 4 years to implement these new reforms.
The changes in this pension reform will have a significant impact on nearly all Dutch Defined Benefit Plans and Defined Contribution Plans, resulting in additional employer costs. Employers should consider these changes in any current salary planning, pension plan redesign or pension contract renewal. For more information about employee benefits, contact us.
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