Changes and immediate opportunities surrounding statutory retirement age
Multinationals in the Netherlands with defined benefit pension plans and their employees can avail of a delay in the currently scheduled increases in the statutory retirement age introduced by the pension reform.
While the Dutch government will likely only sign its revolutionary reform of the pension system into law at the end of next year, a few related laws are being modified in support of the reform.
One of the outcomes is that the statutory retirement age was frozen for 2020 and 2021 at age 66 and 4 months and will only gradually increase to 67 in 2024. Under prior rules, the statutory retirement age would have risen to age 67 in 2021. This measure was a key concession the government made in order to reach an overall agreement with the unions in June 2019. It was passed into law in December 2020.
In January 2021, the parliament also approved a temporary waiver of the early retirement program penalty effective immediately. Employers have been discouraged by government from establishing early retirement programs such as early pension “bridges” to normal retirement, through the application of a 52% levy on the value of the pension subsidies.
The waiver of this levy applies to the pension subsidy amount up to a cap, which is then taxed in a manner congruent to the state pension. Above that cap, the levy will continue to be applied. The waiver applies to early retirement at most 3 years from the normal retirement age and expires at the end of 2025.
The temporary measure is intended to soften the impact of increases in the normal retirement age that have been made in the last few years, thereby enabling some employees to retire with a shorter delay than that required by the gradual increases previously implemented in the statutory retirement age.
This presents employers with an opportunity to allow older employees to retire under the existing pension regime in their companies avoiding a conversion to a DC arrangement once the new reform law is in place.
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