Deputy Minister of Finance, Mr. Weekers, has liberalized the policy for employees who opt for early retirement and continue working. The requirement that their workload must be reduced accordingly has been abandoned, provided that the early retirement does not commence before the employee has turned 60.
Previously, the policy position taken was that the prescribed commencement date of the pension (old-age pension, early retirement, temporary transitional pension or pre-pension) was not allowed to be brought forward, to the extent that the employment income continued after the earlier commencement date. The underlying reason being that pensions are a form of income support to compensate for the loss of employment income for which tax relief is provided. If an employee opts for early retirement without their employment income being reduced accordingly, the tax relief no longer meets the aim of the policy. The penalty is substantial: the full pension entitlement will be taxed as of the earlier commencement date.
However, in practice this position has proven to be a hindrance to Cabinet policy which is aimed at encouraging older employees to remain in the workforce by offering flexible solutions to enable employees to continue working alongside early retirement on a part-time basis. This is why Mr. Weekers, after consulting with the Minister of Social Affairs and Employment, decided to liberalize the policy for employees who opt for early retirement after the age of 60. In that case, the employment income will not be assessed to determine if it has been reduced accordingly.
The requirement that the employment income must be reduced accordingly will continue to apply if early retirement is taken before the age of 60.