Publication date: January 22, 2025

In January, NSC and BBB submitted an amendment regarding a referendum on the new pension system. In this article, we present seven questions regarding this possible referendum to our colleague Natasja Winter. She is a partner at KWPS and chair of the pension section at the Dutch Order of Tax Advisors.

Natasja, what does the proposed pension referendum entail?

A referendum combined with the new pension system sounds like the entire Netherlands would be able to decide on the new system. This is not the case. NSC and BBB's proposal is that if social partners want to transfer, a majority of the participants, former participants, and retirees of that specific pension fund can stop the transfer. If NSC and BBB's proposal is accepted and more than 50% vote against the transfer, the 'transfer party' will not proceed. It only relates to pension funds, not to insurance companies.

What does transferring mean again?

In transferring, ongoing and non-ongoing pensions are converted into the new system. For retirees, transferring concretely means that their ongoing pension payment becomes more variable in principle. For those with a non-ongoing pension, the pension right is converted into a value and subsequently administered as an individual pension asset. According to some, this transfer is in conflict with property rights regulations, and it is certain that lawsuits will arise from this.

Why does the law currently state that only social partners decide on the transfer?

The new pension legislation involves a complete package of related measures. If you remove one wheel, the car drives poorly. For example, transferring allows all buffers in a pension fund to be distributed and used for financing compensation for participants who experience a decline due to the transition to the new pension system. There are groups that benefit and groups that suffer from the transition. If there is no transfer, the question arises whether those employees will be compensated, and if so, who will pay for it. Both topics concern one of the goals set by the legislator with the introduction of the Future Pensions Act: adequately and cost-neutrally compensating active participants who suffer from the transition. Trade unions, employers, and the government did not decide to leave the decision to transfer solely to social partners without reason, who are also advised by experts.

What happens if there is no transfer?

If social partners decide not to transfer or if the referendum result prevents the transfer, the rights and benefits under the current pension system remain in place. This means that ongoing payments do not change in principle, and (former) participants retain the pension payment that was promised. It seems like a good outcome, but other effects occur as well, some of which I have mentioned above. It is therefore not surprising that the Pension Federation immediately announced they were not amused by NSC and BBB's proposal. There is strong criticism from multiple directions.

Why might retirees and participants oppose transferring?

I fear that emotion will be the main driver. The idea prevails that pension funds always had a guaranteed fixed benefit with indexation. This is not true. Pension benefits under the old system have always depended on the financial situation of a pension fund. If the funds are insufficient, a pension fund must reduce the benefits. Often it is heard and read that the transition to the new system involves a casino pension. That is simply nonsense. The pension fund invests the funds in the old system and continues to do so in the new system. Transferring does not suddenly create a new economic reality.

In NSC and BBB's proposal, the pension fund must provide retirees and participants with complete and understandable information, based on which they could decide in the referendum. A fund cannot possibly succeed in this, as there are thick reports on transferring for each pension fund. How can all voting participants and retirees understand this?

Does the pension referendum also apply to insured schemes?

No. If there is an insurance company or premium pension institution as the executor of the pension scheme, there is never a transfer. Existing rights and ongoing payments remain as they are. Participants will build up a pension asset according to the new system in the future. Employers with an insured scheme (about 67,500) thus have nothing to do with the referendum.

When will it be clear whether the participant referendum will take place?

That will take some time. The House of Representatives still has to vote on the amendment. If the amendment is adopted, the Senate can still block it. It appears that there is a majority in the House of Representatives for the amendment, but not in the Senate.