On May 27, 2014 the Upper House of the Dutch Parliament also passed the Reduction of Maximum Pension Accrual and Premium Rates and Maximum Pensionable Income Act (Wet verlaging maximumopbouw- en premiepercentages pensioen en maximering pensioengevend inkomen) containing amendments resulting from the pension agreement from December 2013. The change to pensions in 2015 (Witteveen 2015) is thus a reality.

Below is a summary of the changes in 2015 compared to 2014:

Accrual rates

 

Final pay plan                                                    2014                 2015

Maximum pensionable salary                             n/a                    EUR 100,000 minus state pension offset

Maximum old age pension accrual rates:

Commencing at the age of 67 years                   1.90%               1.657%

Commencing at the age of 66 years                   1.76%               1.535%

Commencing at the age of 65 years                   1.63%               1.422%

Ditto, partner's pension                                       1.33%               1.160%

Minimum state pension offset                              EUR 13,449       EUR 14,204

 

Average salary plan                                           2014                 2015

Maximum pensionable salary                             n/a                    EUR 100,000 minus state pension offset

Maximum old age pension accrual rates:

Commencing at the age of 67 years                   2.15%               1.875%

Commencing at the age of 66 years                   1.99%               1.735%

Commencing at the age of 65 years                   1.84%               1.605%

Ditto, partner's pension                                       1.51%               1.313%

Minimum state pension offset                              EUR 13,449       EUR 12,552

 

Defined contribution pension plan

All net scales are based on the average salary plan accrual rates. The average salary plan and defined contribution offset amounts are the same.

Capping of pensionable salary

The capping of the pensionable salary does not affect the old-age and surviving dependents' pension already accrued on January 1, 2015, although it does affect the amount of the pension to be accrued from January 1, 2015. The financial consequences may be very profound, especially if the risk of death or disability occurs on or after January 1, 2015. The pensions of employees who are already occupationally disabled may also be affected if they are administered by a pension fund.

Net annuity

It is worth looking into the extent to which the net annuity can provide solace. With the net annuity, the contributions are not deductible, no tax on deemed investment income is payable and the benefits are not taxed.

Annuity premium deduction

Not only the pensions will be reduced, the same applies to the annuity premium deduction.

The computational formula for the annual deduction in 2014 is as follows:

  • 15.5% of the contribution base (maximum EUR 162,457) - 7.2A - F, where A stands for the pension accrual and F for the addition to the tax-deferred retirement reserve.
  • The maximum annual deduction in 2014 is EUR 25,181.

The computational formula for the annual deduction in 2015 is:

  • 13.8% x (EUR 100,000 - EUR 11,829) - 6.5 x A - F.
  • The maximum annual deduction in 2015 is EUR 25,181.

Tax-deferred retirement reserve

The following computational formula applies to the addition to the tax-deferred retirement reserve.

In 2014: 10.9% of the profit with a maximum of EUR 9,542.

In 2015: 9.8% of the profit with a maximum of EUR 8,640.

Change as of January 1, 2016

The Deputy Finance Minister has announced that the retirement age will be increased from 67 to 68 years as of January 1, 2016. This is five years earlier than originally planned. This measure is expected to lead to new pension reductions.

How can KPMG Meijburg & Co help you?

Based on the new tax rules, almost all pension plans will have to be changed on January 1, 2015. Making changes to company pension plans is time-consuming and must be done with care and on time. It may therefore be useful to discuss with your tax advisor at KPMG Meijburg & Co the various changes and the points that need to be taken into consideration well in advance of the date on which they are to take effect (January 1, 2015). The Dutch Tax and Customs Administration's position is that the entire pension entitlement will be taxed progressively if the changes are not implemented in the pension plan in good time. For director-major shareholders, this means that the value of the pension will be set at the amount that an insurance company would charge (which is usually higher than the amount accounted for on the balance sheet as a reserve). In addition, deemed interest of 20% will also be charged.

KPMG Meijburg & Co's Pension group has extensive experience with and knowledge of amending pension plans and what is and is not possible for tax purposes. We can conduct a tax review of your current pension plan(s) and assist you with any adjustments that may need to be made, as well as helping you obtain the necessary approvals from the Dutch Tax and Customs Administration and/or the Ministry of Finance. We can also help you with alternative supplementary pension plans or savings schemes for employees with a salary above and below EUR 100,000 and advise you on alternative means of covering the risks of occupational disability and death.

If you would like to receive more information on our pension advisory services and how we can be of assistance to you, please contact one of our Pension group advisors or your personal contact at KPMG Meijburg & Co.

Click here to download the memorandum in pdf format