Future Pensions Act: Delay Leads to Damage

Risks for employees

Employees who accrue pension rights through an insurer face significant risks if the transition to the new system does not take place in time. From 2028 onwards, pension arrangements that have not been converted will no longer be regarded as pension by the Dutch tax authorities. Instead, they will be treated as an immediate payment of income, on which income tax and interest must be paid straight away. This may result in a costly tax settlement, with potentially negative consequences for benefits and tax deductions. More than 1.6 million people in the Netherlands could face this substantial fiscal setback if the transition is not completed in time.

Risks for employers

Employers are responsible for the correct implementation of the pension arrangement and for a timely transition. If this does not occur, the pension provider will terminate the administration agreement, and the employer risks fines from the tax authorities for non-compliance with the statutory funding requirement.

At the same time, the pension arrangement remains an employment condition for employees. They may claim performance of the original pension agreement from the employer. From 1 January 2028, however, performance of the old arrangement will no longer be possible, leaving only a claim for damages due to breach of contract. In addition, employers may be liable for damage suffered by employees as a result of the aforementioned fiscal disadvantages, for example due to breach of contract, violation of the principle of good employership, or tort. All of this can lead to significant financial damage, legal proceedings, and reputational harm.

Failure to involve the works council, or failure to do so in a timely manner, in cases where consent is required for pension changes may result in invalid decision-making. If an employer acts too late and does not allow the works council any meaningful influence, the works council can act effectively by withholding consent or invoking the nullity of the decision. The employer will then have no option but to apply to the subdistrict court for substitute consent. However, if the situation was caused by the employer’s own actions, it is questionable whether such substitute consent will (in time) be granted.

Start on time

The transition to the new pension system requires careful preparation. The Wtp offers opportunities for modernisation and tailored solutions. Starting on time provides certainty and control, allowing employers to properly explore and implement changes in consultation with employees, works councils, and (scarce) pension advisers. A late start may result in high costs, uncertainty and frustration among employees (and their representatives), standard solutions that do not suit the organisation, and potential damage and liability.

Want to know more? Please contact our Employment Law team.

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