Time running out for companies to update employee pensions
Hundreds of thousands of employees working in small and medium-sized enterprises (SMEs) could face a substantial reduction in their future pensions if their employers do not update company pension plans to the new pension system. Employees don’t manage the plans but bear the consequences if their employers don’t act, AD reports. They are therefore advised to check with their employer to ensure their pension plan is on track.
Employers are urged to act quickly. Harold Herbert, board member at VvV, told AD, “By summer it will already be tight. There are independent advisors who review the different options and advise companies on which insurer offers the best deal. If all employers wait until the last moment, they will face problems because there simply aren’t enough advisors.”
About 20 percent of employees—mostly in SMEs—have a pension plan with an insurer or a defined contribution pension institution. These plans, like all company pension plans, must transition to the new pension system. However, many companies have reportedly not started this process. According to the Dutch Association of Insurers (VvV), 19,000 companies have already completed the transition, while roughly 36,000 still need to do so. Larger companies and those with pensions through major funds are said to be largely on track, so the current risk is concentrated among SMEs.
Experts emphasize the importance of completing the transition before 2028. If it is not done in time, the tax authorities will treat the accumulated pension assets as taxable income. This would result in a significant tax liability for employees and reduce their future pension benefits. Retirees are not affected, as only pensions still in the accumulation phase are at risk.
Enno Wiertsema, director of Adfiz, the association of financial advisors, adds, “We are still on time, but the pace must increase. It must be completed by next year. Entrepreneurs are simply focused on their work. A new pension plan is often seen as boring and costly, so who wants to tackle it now?”
Many employer contracts with insurers expire around the turn of the year. This is often seen as a logical moment to discuss a new pension plan, but Wiertsema warns, “Then there is a risk of getting stuck in a backlog. Not only with advisors, but also with insurers.”
