As you know, on 1 July 2023, the Future Pensions Act (or:
'Wtp') took effect. The transition to the
new pension system must be completed by 1 January 2028.1
As this deadline approaches, we remind you of the legal obligations
under the Wtp in this Alert. For example, employers must create a
transition plan that must first be discussed with the Works
Council.
In this Alert, we will briefly outline the changes for employers
and employees, and what the consequences will be for employers. We
will also address the role of the Works Council.
What exactly is the new pension scheme?
The new pension system will bring two major changes:
Pension agreements: 'defined contribution'
only
Currently, there are three different pension agreements: the
defined benefit agreement (size of pension set at final or average
salary), the defined contribution agreement (predetermined
contribution is invested for pension), and the capital agreement
(amount of capital is fixed and converted into pension). Under the
new system, the defined contribution agreement will be the only
remaining option. Where possible, pensions will be accrued by
individual choices of investment risks.
No longer average pension contribution system but a flat rate
(degressive accrual)
The current system allows for an average contribution. This means
that the contribution and the accrual of pension rights are the
same for all employees or are an equal percentage of their
salaries. No distinction is made between age, gender, or health
conditions. This system will disappear. Although the contribution
will still be age-independent, the accrual per year will be
different. The older the participant, the less pension he or she
will accrue per year.
Consequences for employers
Employers must ensure that they have defined contribution
agreements with their employees before 1 January 2028. Also, the
pensions accrued must be transferred before that date. This is
called 'conversion' (in Dutch 'invaren'). The
legislator has provided a milestone plan that employers can use to
take steps before the deadline. This plan is just a guideline and
not binding. We will discuss those steps below.
Transition plan
One of the steps is that employers must draw up a transition plan.
The Wtp requires all employers in the Netherlands with a pension
scheme to draw up a transition plan. This plan will be the basis
for the transition to a new pension scheme. The transition plan
should at least cover: (i) the details of the amended pension
agreement, (ii) what will be done with the pension rights already
accrued (the conversion), and (iii) the impact of the changes on
the employees.
The transition plan must be ready by 1 January 2025 (in the case of
a general pension fund, company pension fund, or industry-wide
pension fund) or by 1 October 2026 (in the case of premium pension
institutions or insurers).
Works Council
All pension agreements must be amended for future pension accrual
before 1 January 2028. Amending the pension plan may require the
consent of the Works Council ('OR').
Usually, the OR is not involved in amendments to pension plans with
industry-wide pension funds. But employers with their own insured
pension plans must consult the Works Council (or employees'
representation). By law, the Works Council has a right of consent
in the case of decisions related to pensions (which is an
employment condition). Such decisions include the determination of
the contribution, conditions of supplementation (indexation), or
the choice of a particular provider.
Changes to pension agreement
All pension agreements must be adjusted for future pension accrual
before 1 January 2028. For mandatory industry-wide pension funds,
the board of the pension fund will decide on the amendments to
articles of association and regulation. But employers that have
pension agreements with a general or company pension fund should
probably adjust the pension agreements with their (former)
employees. One option is, of course, by mutual consent. But case
law shows that pension agreements may also be amended by tacit
acceptance. Provided there is 'informed consent', the
'negative option' or 'silence gives consent' are
also valid options. Pension agreements may also be changed
unilaterally by employers if there is a unilateral change clause,
provided the employers' interests are sufficiently compelling.
If there is no unilateral change clause, employers could argue that
it is reasonable to adjust the pension agreement to the new defined
contribution agreement, and that employees should reasonably
accept. The Supreme Court confirmed this in the IFF case.
Overview of deadlines
Consultation on terms and conditions of employment
The deadline of 1 January 2025 (or 1 October 2026) means that
employers should start preparing in time. Employers have until
1 January 2025 to file their transition plan (if
they have a general pension fund, company pension fund, or
industry-wide pension fund) or until 1 October
2026 (in the case of premium pension institutions or
insurers). Before those dates, the change and co-determination
processes must be concluded.
The entire transition process, including the change processes, must be completed by 1 January 2028 at the latest.
Footnote
1 In the law, it still states January 1, 2027. For the time being, January 1, 2028, can be assumed.
Originally published 28 June 2024
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.
