Your Opportunity in the Dutch Pension System

| Your Financials

Not many employees realize they work 20% of their time to ensure their pension income enables them to continue their lifestyle after having stopped their active career. The system is complex and scares people off to see (a) if their expected income will be ensured sufficiently if they keep doing what they do and (b) if their ambition is not completely supported, what options you have to do something about it. Contrary to what many think, pensions are not only relevant when you are above 50 years old. The earlier you initiate improvement, the smaller the effort to achieve it.  

It is hard to have missed it. The Dutch senate recently approved the proposal of the Future Pensions Act. This means that after 15 years debating how a system that turned out to be impossible to sustain, has been adapted to the possibilities and circumstances of our time. The Dutch pension system contains almost €1,500 billion (yes that is €1.5 trillion) in accumulated assets in addition to the state pension (AOW) financed by the labor force not yet entitled to it. Pension capital and its accumulation is in a harness; It contains fiscal anchors and is therefore only flexible to a limited extent. That makes the number of parties involved large and so do the interests. The main changes: 

  1. Have consequences for the costs of accruing the pension (i.e. employers and employees must arrive at a good distribution of these),  

  1. Lead to possibly fewer fixed pension benefits because investment results have a more direct influence on this (but a much higher pension is also possible), 

  1. Include some extra flexibility options and  

  1. The fiscal space to build up capital is more than doubled, also for employees. 

The transition phase lasts until 2028 latest. This will occupy many employers, pension execution firms and pension funds as well as their advisers to plan projects, effective communication and help to choose. 

This is where we feel lies an excellent opportunity for employers to strengthen the employee benefits framework. The transition of pension arrangements will take years to prepare, organize and execute. But the possibility for employees to significantly increase pension capital in voluntary schemes can start as early as January 2024.  

The simplest way to enable staff to make informed decisions is to facilitate voluntary meetings for groups to share general information, discuss examples and show financial impact. Employees are responsible to choose and appoint advice and product solution providers individually. 

At the other extreme of possibilities is the employer contracting a professional and licensed provider to (1) organize one or more meetings to gauge interest for next steps, (2) organize 30-40 minute individually tailored sessions for those with sincere interest and (3) arrange access to qualified arrangers of voluntary pension products for individual employees. 

This way there is no formal duty of care responsibility with the employer (employers inform, employees choose and at the same time employees do not have to wait to benefit from these new possibilities.