New Dutch Pension Act (Wtp) 2023
As of 1 July 2023, the Future Pension Act (Wtp) will enter into force. There will then be a transition period that runs until 2028: then everyone must have switched. Until then, your (or you as an) employer can implement the new working method. The new system will be - as you can read on the government website - "more transparent, more flexible and better tailored to the current economy and labor market". That sounds nice, but what does it mean? Lupacompany explains.
AOW, pensions and annuity
The income you are entitled to in the Netherlands after you retire can come from three sources: Firstly, everyone who reaches retirement age is entitled to AOW. In addition, you can receive an annuity that you have built up yourself by setting aside money in an annuity policy during your working life. This provision is mainly used by entrepreneurs because they have accrued no or less pension through an employer. This last option is the third -and next to the AOW the most common- form of income for pensioners. As an employee, you are entitled to the pension that has been set aside from your monthly gross income by your employer. For the time being, this was a percentage of your income that increases as you get older. The reserved amount of you and others in the pension fund to which your employer is affiliated, is put into a large proverbial pot, from which pensions are paid out. This article is about these pensions: the system from which they are accrued and paid is changing.
New pension act
The new pension act was formed from the vision that the current system no longer fits. For example, the old system would not move along with economic fluctuations. This could, for example, lead to 'the pot' emptying too quickly. Fluctuations pose too much of a threat to the financial security of the elderly. The new pension system must therefore be more flexible. If it moves with economic good and bad times, you limit the risks, is the thought. Another criticism of the current system is that you accrue less pension when you are younger, which is disadvantageous for people who, for example, become self-employed during their career. In a new system, it must be taken into account that people are now much less likely to remain employed by the same employer for their entire career. The new system should facilitate this change. Finally, the current system would not be transparent enough. The pension act must also provide an answer to this.
Flexibility
To make the new pension system more flexible, it has been decided that pension funds must invest their collected contributions. The investment result therefore affects the pension amount. Because investment returns move with the economy, pensions would automatically do the same: if the economy is doing well, the return will rise. In poor economic conditions, the yield decreases. As a result, there is more certainty that there is enough money in the pension fund to pay out. But at the same time, you have less certainty about the amount you will receive when you retire. After all, it is not possible to determine in advance what return will be achieved.
Transparency
In order to prevent (too much) uncertainty and too little insight into the accrued pension, transparency is an important part of the new pension act. The system must provide that everyone who accrues pension has access to the state of affairs regarding his or her accrued pension. You must be able to follow in real time how your pension is doing. But at the same time, there is no insight into the actual amount in the future.
Equal premium
Another difference with the old system is that the premium paid by employees, regardless of age, is the same for everyone. Pension accrual remains mandatory and runs through the employer. For example, the new scheme does not mean that if you become an entrepreneur, the pension will be arranged for you. You are responsible for a retirement provision on top of the AOW. But the amount accrued in your years as an employee will be higher than in the old system.
Choosing between two options
In the new pension act, there are two options for employers and employees for dealing with risks. In addition to the personal pension pots, you can choose to set aside a joint part to absorb setbacks. For example, together you can choose to reserve part of the (extra) return in good years for worse years, in which the return is negative, for example. But there is also the possibility of not doing this. It is not legally established whether and how a joint reserve takes shape.
More certainty?
Finally, there are a number of issues that must be settled in 2028 and that are included in the new pension act. For example, there are new and fixed agreements about the state pension age: From now on, this will be adjusted in line with (increasing) life expectancy. Agreements have also been made about early pensions and survivors' pensions in the Future Pensions Act. Because the agreement is the result of agreements between the government, employers' organizations and workers' organizations, the idea is that the new system offers more certainty and insight.
