Netherlands:
Cuts Of Pension Rights And Benefits 2020: Granting A One-Year Reprieve
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Social Affairs Minister Wouter Koolmees has granted underfunded
pension funds a one-year reprieve from implementing cuts of pension
rights and benefits (article 142 Dutch Pensions Act). However, the
minimum required funding will be 90%. If the coverage ratio is for
example 87%, unconditional cuts must be implemented in order to
improve the coverage ratio to 90%.
Pension funds must explain the one-year reprieve
Although the minister explained that social unrest and losing
confidence in the future of the Dutch pension system must be
prevented, pension funds still required to explain the one-year
reprieve. They must clarify the issues of a balanced approach for
all their participants and pensioners.
A balanced approach: vague standard Why?
The one-year reprieve has everything to do with the expected new
pension system. This new pension contract has to solve the main
funding problems of the current pension system. Is the Minster
suggesting that preventing unnecessary cuts of pension rights
isn’t enough motivation?
Walking on thin ice
This requirement is confusing. The legal meaning of a balanced
approach is not very clear either. According to the Dutch Pensions
Act this is a very vague standard. So it’s walking on thin ice.
One way or another, there are very strong arguments why pension
funds must take the opportunity to prevent cuts on the eve of an
new pension system. We would like to assist you on these
matters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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