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In 2024, nearly 93,000 employees entered a new phase of life, retiring at an average age of 66 years and 1 month.
For over 1.6 million Dutch people building their pension with an insurer, an unpleasant surprise may be looming. Outdated schemes could lead to the Tax Office suddenly taxing their accrued pension. Fortunately, this financial setback is relatively easy to prevent.
New Pension System in the Netherlands #
Most workers in the Netherlands build their pension through a pension fund. However, 20 percent of the workforce still has a pension insurance policy. In this case, the employer, often with the help of a pension advisor, concludes a contract with a pension insurer to arrange the pension.
Recent figures from De Nederlandsche Bank (DNB) show that there are 57,000 contracts between employers and insurers. The situation regarding pensions in the Netherlands is set to change. On January 1, 2026, 11 million Dutch people will transition to a new pension system. By January 1, 2028, everyone with a pension scheme will have fully transitioned.
Employers face an important task: updating pension schemes for their employees on time. If companies switch to the new system, pension funds must implement that decision by January 1, 2027, or, if parliament agrees, by January 1, 2028 at the latest.
Why is it Crucial to Arrange the Transition Quickly? #
Before the new pension system takes effect, Dutch people with insurance must still switch to the new arrangement. The sooner employers arrange the transition for their staff, the better.
Currently, the Tax Office only taxes pension money when someone receives it monthly after retirement. This is usually at a lower rate than during their working life. From 2028, the situation will be completely different. The Tax Office will then no longer view the assets in old pension schemes as pension, but as directly taxable income. Employees will therefore pay income tax on the entire amount plus interest, because no tax has been paid for years.
There are other risks for employees who switch too late. For instance, there is a chance of a hefty tax assessment landing on the doormat. An employee might also have to pay wealth tax, which can be a significant amount for someone who has been working for a long time.
Furthermore, a higher income and assets can affect benefits and tax deductions. Someone might become less eligible for financial support or lose certain deductions entirely.
Not All Employers Have Taken This Step #
Nobody wants a large portion of their accrued assets to disappear to the tax authorities. Yet, many employers have not taken any action. Only one in five pension contracts has been converted. So far, an estimated only one-fifth of pension contracts have been switched, reports the NOS.
Insurers expect that half of the remaining contracts will only follow on January 1, 2028. The new policies are ready, but few employers are coming forward.
The fact that a significant portion of employers has not yet taken action is a major problem, according to Fieke van der Lecq. She has been serving as the government commissioner for the ‘pension transition’ since 2024. Van der Lecq is calling on Dutch people with pension insurance to get their employers to take action immediately.
The Verbond van Verzekeraars (Association of Insurers) agrees with the government commissioner. According to this organization, employers must contact an advisor as soon as possible. If companies handle these important matters at the last minute, a peak in workload may arise. This also affects insurers and advisors, who would have to process a very large number of applications in a short time.
Disadvantages for Employers Too #
A late transition is not only bad for employees but also for employers. Companies are obligated to properly arrange the pension contributions for their staff. If they fail to do so, a fine from the Tax Office may follow.
Moreover, there is a chance that employees will start claiming missed pension money from their employer. This could turn into a major financial blow for a company. In any case, it is important to involve employees as much as possible in the transition process. Good communication strengthens the bond between employer and employee.
Do you work for a company and are not sure if the transition to a new pension scheme has been arranged? Don’t be afraid to ask. Your action might prompt your employer to move and prevent financial problems in the long run.