What led to the enactment of the Future Pensions Act (WTP)?

The WTP was born out of a landmark agreement in 2019 between employer and employee representatives and the Dutch government to modernise the pension system. This agreement led to the drafting of the Future Pensions Act, which was passed by the Senate after extensive debates on 30 May 2023.

What are the main changes introduced by the Dutch Future Pensions Act (WTP)?

The WTP initiates a shift from Defined Benefit to Defined Contribution, a Transition offering pension contributors more control and flexibility. Under the new system, pension outcomes are directly linked to  contributions , providing a clearer understanding of individual pension provisions.

-       Types of Defined Contribution Schemes: There are three new schemes introduced:

1.     Solidary Contribution Scheme: This scheme offers a flat-rate contribution and uses collective risk sharing with reserves to cover disappointing returns.

2.     Flexible Contribution Scheme: Similar to the solidary scheme, it allows more participant involvement in investment decisions.

3.     Contribution-Payment Scheme: This scheme is available only to pension insurers and features flat-rate contributions, taxed up to a particular ceiling.

What does the transition plan involve?

The transition plan requires:

-       Selection of a Pension Scheme: Employers must choose an appropriate new pension scheme.

-       Stakeholder Consultation: Plans must be developed in consultation with unions or works councils.

-       Approval and Implementation: Plans need approval from the pension administrator and must outline the conversion of existing rights to the new system.

How are existing pensions affected by the new law?

Existing pensions must be transferred to the new scheme. Accrued pensions will be integrated into the new system without allowing individuals to object. This process is intended to ensure fair and balanced treatment for all participants.

What responsibilities do employers have under the WTP?

As key stakeholders in this transition, employers play a crucial role. They are responsible for developing and submitting transition plans, informing and guiding employees, and ensuring compliance with new standards. This active involvement empowers employers to shape the future of their workforce's pension benefits.

-       Developing and Submitting Transition Plans: Ensuring set deadlines submit detailed plans.

-       Informing and Guiding Employees: Employers must provide clear information about the changes and support employees through the transition.

-       Compliance with New Standards: Employers must adhere to the new pension structures and ensure that the transition respects the rights and expectations of their workforce.

What are the potential opportunities and challenges presented by the transition?

While the transition poses significant challenges, it also presents opportunities. Employers and employee representatives can navigate these changes more effectively by considering broader reward perspectives. The expected outcome is a more sustainable, generationally fair pension system that provides more predictable costs for employers, offering a more straightforward path forward.

What are the timelines for implementing the new pension system?

The WTP took effect on 1 July 2023. A four-year transition phase follows, during which pension providers must implement new pension schemes that are compliant with the WTP.

By 1 January 2028, all Dutch pension schemes must align with the new legislation.