Simple Overview of the Progress of the Future Pensions Act

On 30 January 2025, the Minister of Social Affairs and Employment informed the House of Representatives about the progress of the transition to the new pension legislation. It concerns a 27-page letter filled with the latest developments. Unfortunately, the letter also contains some inaccuracies. In this update, we discuss the most important updates for both the insured market and the pension funds.

Developments in the insured market

Pension schemes placed with an insurer or premium pension institution (PPI) must comply with the new legislation by 1 January 2028 at the latest (this date is currently set in legislation). This concerns roughly 67,500 schemes in total.

The following number of schemes has been converted to the Future Pensions Act as of 1 January 2025:

• approximately 36% of the schemes placed with an insurer; and
• approximately 31% of the schemes placed with a PPI.

It is expected that a significant number of conversions (40%) will take place at the last transition moment. This is worrying. Employers and advisors are urged to plan and initiate the transition. Not only must the implementation of the new scheme be taken into account, but also the employment conditions process that precedes it.

The transition monitor further shows the following:

• Financial advisors indicate that the premium level will be within a range of 20% to 25%. It is unclear which schemes are meant by this. If it concerns insured pension schemes, a range of 12% to 18% seems more realistic to us.
• In 44% of the transition plans, a coverage of 35% or higher is chosen for the partner’s pension in the event of death before the pension date. This will mainly be the case with pension funds. For insured pension schemes, a range of 20% to 30% is more common, and participants who experience a decline are compensated on an individual basis.
• Employers often choose the transitional law for the age-dependent premium scale, as this simplifies the compensation issue. This choice means that two pension schemes must be administered, at least in the case of new employees.
• Employers do not yet choose a compensation scheme within the pension scheme, but in salary. This does not surprise us because pension compensation also applies to new participants, which increases costs.
• In approximately 55% of all pension schemes in the Netherlands, the solidarity contract is chosen, and in approximately 45% the flexible contract. This is incorrect. For the roughly 67,500 pension schemes with insurers and PPI’s (more than 98% of all schemes), only the flexible contract and the premium payment agreement are possible.

Developments at pension funds

Although the first three pension funds made the transition to the new pension legislation on 1 January 2025, most pension funds are still busy with preparations. The first deadline is now behind us: for 92.5% of the pension schemes executed by pension funds, the social partners have completed the transition plan on time. It is now up to the pension fund to draw up the implementation plan and the communication plan.

Based on the transition plans drawn up, the following conclusions can be drawn:

• 77% of the pension funds expect to transfer the already accrued pension entitlements into the new scheme. They therefore choose to merge.
• Compensation for the abolition of the average premium takes place within the pension scheme in 92% of the cases. The compensation also applies to new participants, except in the case of a one-time compensation. In only 18% of the cases is compensation (partly) financed from the premium.
• In all cases, social partners choose to add a solidarity or risk-sharing reserve to the pension scheme at the pension fund. The maximum height of the reserve varies considerably, between 2% and the maximum allowed 15%.
• In almost all cases, the intended premium is (almost) equal to the current average premium. This leaves a substantial gap between the premiums at pension funds and the premiums in the insured market.
• As noted earlier, in 44% of the transition plans, a partner's pension of more than 35% is agreed upon. Calculations by KWPS show that with a partner's pension coverage of 35% or more, a majority of participants will benefit.