The Dutch cabinet and the social partners have reached an agreement on the elaboration of the country’s pensions accord of last June, said Social Affairs’ minister Wouter Koolmees.
In a statement released on Friday, Koolmees said that in the new system, pensions will no longer be guaranteed, but will rise and fall in line with markets, shifting risk to participants.
Although no details have yet been released about the new pensions contract, the players have been discussing defined contribution (DC) arrangements, albeit with individual pension claims on collective assets.
As a result, pension funds will no longer be constrained by a coverage ratio largely dictated by a discount rate for liabilities, which has significantly declined in the past years due to continuously falling interest rates.
Projected returns on investment will become the criterion for establishing a participant’s expected pension level instead.
As part of the new agreement, Koolmees said that “because of the current extraordinary economic situation”, the temporary reduction of the minimum required funding level – from 104.3% to 90% – will be extended until the end of 2021. New arrangements need to be agreed later.
The minister and the social partners claim that, as a result of the new accord, the pensions system will become more transparent and increasingly geared up for a tailor-made approach.
Koolmees said the new system will offer the chance of a better pension sooner than under the current rules.
He added that contributions for employers are to remain stable, indicating that contributions will become age-independent, while annual pensions accrual will decrease with age.
He also said it will become easier for self-employed workers (ZZP’ers) to accrue a pension.
However, the conclusions of the negotiations about the entire reform package haven’t yet been made public either.
Citing a leaked summary of the new agreement, Dutch pensions publication Pensioen Pro said pension funds will be allowed to adopt the new rules as of 2022.
As the new arrangements have to be introduced no later than 2026, the social partners must provide their respective pension funds with clarity about their new pension plan in 2024.
Pension funds must in principle merge existing pension rights with new pensions accrual.
However, there will be an opt out for schemes than can show that merging rights can’t be implemented in a balanced way for all participants.
The summary further suggested that the tax-facilitated pensions contributions were to be capped at more than 30% of the pensionable salary.
The social partners of employers and unions are to consult their rank and file before the minister tables the proposals in a framework note for parliament before the summer.
The players said that subsequently, consultations would be held on a regular basis in order to monitor the reform process.
The only direct and concrete result of the initial pensions accord of last year was a slowdown of the rise of the retirement age of the state pension (AOW).
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