News and info from our Dutch office
by Alexander Beard, on Apr 26, 2016 5:48:38 AM
The capital must be converted to an annuity on or before the retirement date. In principle, the investment risk and the interest rate risk (the risk that the rate for purchasing an annuity changes) rest with the employee. Given the current low interest rates, employees who retire these days are buying a much lower pension than they would have been able to purchase in higher interest rates markets.
Current legislation in the Netherlands does not allow employees to take out (part of) the pension capital at once or continue investing the pension capital.
New legislation per 01-07-2016 will change this.
It will be allowed to continue to keep investing (part of) the pension capital. The idea is that this will result in higher pension payments. Taking out (part of) the pension capital at once will still not be allowed.
Employers with DC plans will be informed by their pension providers later this year about the implementation of the new legislation.
Self-managed pension plans
In the Netherlands if you (directly or indirectly) own more than 10 per cent of both the beneficial entitlement to and the legal control over the shares of a Private Limited Company (BV) there has always been the possibility to set up a self-managed pension plan.
The Dutch State Secretary of Finance New is researching new legislation about these kind of self-managed pension plan per 01-01-2017.
Expectations are that per this date, self-managed pension plans are no longer allowed. It is likely that it will be allowed to buy off the pension provision. In that case only 70% of the value will be taxed.
Two alternatives to the current system were put forward in the past few months;
- To abolish the tax relief for self-administered old-age provisions, combined with the possibility of commutation. Only 70 per cent of the commutation value for tax purposes will be subject to personal income tax at the progressive box 1 rate in the hands of directors/substantial shareholders (DGAs) and 20 per cent may be received tax-free.
- Designated old-age reserve. This alternative is a fiscal reserve on the balance sheet of the company.
We will keep you informed about all details, when legislation becomes final.
Managing Director - Europe