Through regular updates, Mercer will keep you informed of all amendments to legislation that affect your pension scheme. In this update we will discuss developments in the areas of law and tax.


Lump Sum Payment, Early Retirement and Leave Savings Scheme Bill

The Lump Sum Payment, Early Retirement and Leave Savings Scheme Bill provides for the surrender of 10% of a pension on the retirement date, an exemption of 52% of the early retirement scheme for employers and an extension of leave savings from 50 to 100 full weeks. The Bill was sent to the Lower House of the Dutch Parliament on 3 September 2020 by Minister Koolmees.



Lump-sum payment

The first measure proposed in the Bill is the obligation of every Dutch pension administrator to cooperate on the commencement date of the retirement pension with a request to surrender a maximum of 10% of the value of the accrued entitlements to a retirement pension. In the case of capital-sum and premium agreements, this is a maximum of 10% of the capital intended for the retirement pension.


At present, such a surrender is not supported. The amount surrendered is taxed at a progressive rate. A punitive fiscal levy, in the form of revisionary interest, will not apply under the proposed legislation.


The member may use the surrender value entirely at his or her own discretion, for instance to purchase or renovate a house, or for a trip.


The member’s pension administrator is obliged to grant the surrender request if the following conditions have been met:

(i)The amount to be surrendered does not exceed 10% of the value of the accrued pension entitlement;

(ii)The surrender may only take place on the retirement date;

(iii)It is not possible to combine this surrender with the so-called high/low construction in which the level of pension benefits may vary;

(iv)The remaining pension must be greater than the legal limit for surrendering pensions (annually approximately €500, figure for 2020);

(v)If partial surrender results in a reduction in the partner’s pension, the member will require the consent of his or her partner who is the beneficiary of the partner’s pension. It is the intention that the measure will take effect as of 1 January 2022.



Easing of the early retirement levy


The Cabinet and the social partners have together established that people, in particular those who have almost reached the commencement age of the state old-age pension, are overcome and have difficulty reaching the commencement age of the state old-age pension in good health and in employment. This is partly due to the accelerated increase in the commencement age of the state old-age pension in 2015.


It will be possible for employers to enter into agreements with older employees with regard to early retirement, without the employer having to pay a punitive levy (final levy) of 52% on the payment granted.


From 2021 up to and including 2025, employers will not pay a punitive levy of 52% on their early retirement scheme up to a net amount that corresponds with the state old-age pension (approximately €21,000 gross per annum). A condition for this is that the employee leaves the employer’s employment in the last three years prior to the commencement age of the state old-age pension. The total payment over three years (€63,000) may also be paid as a lump sum.


In so far as the payment occurs earlier than 36 months before the commencement age of the state old-age pension or if a higher amount is paid than the amount exempted, the scheme will still be deemed to be an early retirement scheme in respect of that part which does not meet the conditions set out in the Act, on which the employer will be required to pay the punitive levy.


Employees will in fact receive their state old-age pension earlier, but it will be paid by the employer. They may supplement this themselves, for instance by having their supplementary pension commence earlier. The measure is of a generic nature. It is therefore not the case that it is limited to certain branches or (arduous) occupations. It is the intention that the measure should take effect as of 1 January 2021.



Extension of leave savings

To offer employees more opportunities to stop working earlier, the number of weeks that qualify for tax-exempt leave savings has been doubled from 50 weeks to 100 weeks. An employer may grant additional leave, for instance by providing compensation for overtime or shiftwork (in part) through the accumulation of additional leave. If an employee saves more than 50 weeks of leave, the employer must pay salary tax on the surplus.


Raising this ceiling to 100 weeks gives the employee more opportunities to stop working earlier or to take breaks from work for longer periods in the interim.


The Bill states explicitly that the balance of the leave savings may be used for early retirement. A levy is therefore not payable on the early retirement scheme. It is the intention that the measure will take effect as of 1 January 2021.


Mercer has already gained considerable experience in designing and implementing leave savings schemes. We can certainly be of service to you in designing and implementing your scheme.



Divorce (Division of Pensions) Bill 2021 submitted

The Divorce (Division of Pensions) Bill 2021 is now being processed by the Lower House of the Dutch Parliament.

The Divorce (Division of Pensions) Act 2021 is the (proposed) successor of the Divorce (Pension Settlements) Act, which has been in force since 1995.

Present situation

Any person who divorces is subject at present to the Divorce (Pension Settlements) Act. On the basis of this, he or she has a right to a pension settlement of the retirement pension accrued during his or her marriage. This settlement means that each of the partners is entitled to a direct payment of 50% of each pension instalment. The pension entitlement remains an entitlement of the beneficiary, 50% of which is paid to the former partner.
The parties may opt to have the pension entitlement of the former partner, namely the retirement pension and the partner's pension, converted into a personal pension entitlement in favour of the former partner. The link between the former partners is then definitively broken.

Divorce (Division of Pensions) Bill

As of 2021, pensions will be divided by means of conversion in the event of divorce. This will be the new standard. Half of the retirement pension accrued during the marriage will be converted into a personal right to a retirement pension for the former partner. If the former partner indicates within six months that he or she wishes to retain the partner’s pension, this will not be taken into account in the conversion.
One of the arguments for the change is that conversion has not been used much up until now and the former spouses therefore continue to be linked to each other for years afterwards. As a result of conversion becoming the standard, this link will be broken.
If the parties wish to enter into agreements that deviate from this, the pension administrator is bound by these if the pension administrator is notified of this within six months after the divorce. After this period, the pension administrator is no longer obliged to reverse a conversion that has already taken place.

To give pension administrators a reasonable implementation period, the intended date on which the Act was to come into force was 1 January 2021. This has already been postponed to 2022.



Pan-European Personal Pension Product (PEPP)


The regulation that makes it possible to offer the Pan-European Personal Pension Product (PEPP) took effect on 14 August 2019. The European supervisor, EIOPA, had until 15 August 2020 to develop the derived regulations. The supervisor completed this task on 14 August 2020. Twelve months after the publication of these derived regulations, it will be possible for providers to launch PEPPs on the market.


The pension schemes that result from the PEPP are intended to be personal, voluntary pension schemes for residents of the European Union.


The European Union regards the facilitation of cross-border employment as one of its main aims. Making it easier to transfer pension accrual across borders contributes to this. The European Commission also considers it a matter of concern that there are few affordable opportunities for pension accrual in some Member States. The arrival of PEPPs ought to ensure that pension accrual can also take place cost effectively and securely in these Member States.


The PEPPs will have the same standard characteristics everywhere. Providers within Europe may be, amongst others, insurers, banks, pension funds and asset managers. Dutch pension funds and PPIs may not offer PEPPs. The fiscal treatment of pension accrual within a PEPP falls within the autonomy of the separate Member States.


An important characteristic of the PEPP is its cross-border portability. This means that if a PEPP saver decides to move to a different Member State, he or she has the right to continue participating in the PEPP. For instance, if a PEPP saver who is a resident of Germany participates in a PEPP that is administered by a provider established in Germany, the provider must ensure that participation in the PEPP is possible after the PEPP saver has moved to a different Member State.


Another relevant characteristic of PEPPs is the so-called ‘switching service’. This means that a PEPP saver has the right to transfer the assets accrued in the accumulation phase of the PEPP. This also applies to a transfer to a provider in a different Member State, irrespective of whether the PEPP saver moves to a different Member State. The right to transfer assets commences five years after concluding the PEPP agreement.