The parliamentary parties VVD, PvdA, D66, ChristenUnie and SGP have reached agreement with the government on pension changes to take effect in 2015. The changes relate to a further reduction in pension accrual and a number of other measures. The proposal to amend the bill on the Reduction of Maximum Pension Accrual and Premium Rates and a Maximum on Pensionable Income (“Witteveen 2015”), will be presented as soon as possible. The bill to implement the pension and annuity top-up rules has been withdrawn.
Agreement has been reached on the following:
- Adjustment of the maximum pension accrual rates: the accrual rate for average pay plans will be 1.875%. This will enable a participant with an accrual period of 40 years to realize a pension of 75% of their average salary. The maximum accrual percentage for final pay plans will therefore probably be 1.666% per year of employment.
- As in earlier proposals, the maximum pensionable income will be capped at EUR 100,000, less the state pension offset.
- Employees in higher income brackets will be able to build up additional voluntary retirement savings under a tax-friendly scheme. Employees whose income is EUR 100,000 or more will be able to build up a retirement provision via a net annuity, which is generally equal to a pension accrual of 1.875% of their average salary. The premium contribution will be paid from the net salary or net income. There is, therefore, no tax relief for the premiums and the annuity payments will be untaxed. Another tax-friendly aspect is that the accrued value will not be subject to the deemed investment yield tax in box 3. This scheme is available to anyone with an income of EUR 100,000 or more.
- The tax relief for the retirement reserve and the life insurance policy or banking annuity will also be correspondingly reduced in line with the adjustments to employee pensions.
- A voluntary collective pension plan for the self-employed with no staff (zelfstandige zonder personeel; “zzp-er”) will be set up, which will offer participants flexibility with regard to contributions and payments. A person can draw from their pension in the event of disability. Their pension capital will be protected should they become dependent on welfare payments. The plan will be administered by an investment institution.
- The Dutch Central Bank (De Nederlandse Bank; “DNB”) will monitor whether the reduction in the maximum pension accrual for tax purposes actually results in lower premiums. No less than nine new safeguards will be introduced in order to achieve this.
- The Cabinet is prepared to include an option for employees to use the employee share of the pension premium to repay their home mortgage, as proposed by the Reformatorisch Maatschappelijke Unie. The Cabinet will look into how this can be implemented as carefully and as soon as possible. This will include a feasibility test, which will also be used to assess the pros and cons of the various alternatives.
- In 2014, the Cabinet will begin a multi-party dialog on the long-term future of our pension system. The Social and Economic Council of the Netherlands (Sociaal Economische Raad; “SER”) will be asked to provide their advice before the end of 2014.
How can KPMG Meijburg & Co help you?
The amendments to the tax rules contained in this bill mean that further changes will need to be made to numerous pension plans as of January 1, 2015. These new changes are in addition to the tax adjustments that must be implemented by January 1, 2014, i.e. the raising of the standard pension retirement age and the reduction of the pension accrual. Making changes to company pension plans is time-consuming and must be done with care and on time. It may therefore be useful to discuss with your tax advisor at KPMG Meijburg & Co the various changes and the points that need to be taken into consideration well in advance of the date on which they are to take effect (January 1, 2014 and January 1, 2015).
KPMG Meijburg & Co’s Pension group has extensive experience with and knowledge of amending pension plans and what is and is not possible for tax purposes. For example, we can conduct a tax review of your current pension plan(s) and assist you with any changes that may need to be made, as well as helping you to obtain the necessary approvals from the Dutch Tax and Customs Administration and/or the Ministry of Finance.
If you would like to receive more information on our pension advisory services and how we can be of assistance to you, please contact one of our Pension group advisors or your own contact at KPMG Meijburg & Co.