Since mid-October, the Netherlands have a new government. Mark Rutte, who was leading the former coalitions as well, is also the new prime minister of the new coalition.
The coalition agreement for the new Dutch Government, presented on 10 October 2017, contains major surprises in the area of the pension system. The coalition parties in our new government (Liberals (VVD), Christian Democrats (CDA), Progressive Liberal Democrats (D66) and Christian Union (CU)) are aware that the current pension system is no longer in line with the changing labor market. Increasing life expectancy, the financial crisis and low interest rates have exposed the vulnerabilities of the system. The new government wishes to renew the pension system on the basis of the proposal from the Social and Economic Council (SER). The government considers the following measures essential in order to realize a new pension system by 2020:
Personal pension assets with collective risk sharing
Social partners have to develop a pension contract that takes personal pension assets into account. A collective pay-out phase in which the risks are shared remains in place. Rules are imposed on a collective buffer for the longevity risk and investment risk. The model might be based on the new legislation on deferred annuities for DC-contracts, which is applicable since September 2016.
Abolition of average pension contribution system, age-independent contribution becomes mandatory
The average pension contribution system will be abolished. There will be a switch from an age-independent pension accrual to an age-independent pension contribution. Participants receive accrual that is in line with the contribution paid in. This means that pension accrual decreases as people grow older.
Retention of mandatory participation and collective administration
The basic principle of collective administration remains in place. Mandatory participation in sectoral pension funds and occupational pension funds remains in place.
Perhaps adjustment of pension framework under tax law
The government will later investigate whether it is possible only to apply limitations within the pension framework under tax law on the pension contribution to be paid in.
Adequate risk cover necessary
The renewed pension system must include adequate cover for surviving dependent’s pension and disability pension.
More freedom of choice for participants
The renewed pension system should offer participants more scope for freedom of choice. The cabinet will investigate whether it is possible to withdraw a limited part of the pension assets as a lump sum upon retirement. The system should allow self-employed persons the opportunity to join voluntarily.
Support for transition to renewed pension system
The government will facilitate the collective conversion of pension assets into individual pension funds. There is an amount of EUR 234M for 2020 and 2021 foreseen; there may be simultaneously two different tax systems applicable for the current and new system for a limited period of time as well.