7 questions about the Law on the Future of Pension

Published on: 11 September 2022

The House of Representatives of the Netherlands started their deliberations on the Law on the Future of Pension on Monday, September 12. Excuse me? What do you say? What law?

The Law on the Future of Pension, also referred to as Wtp in an abbreviated form.

Below you will find the answer to questions such as “What does this law entail?”, “Why does this law concern millions of people?” and “What is the role of pension administrator APG in all of this?”.

Update - Monday 12 September was the first legislative consultation on the Future Pensions Act. Spokespersons from 15 different parties were present. Many questions have been asked about the proposed bill, both by coalition parties and opposition parties.

Green Left and PvdA in particular took a critical stance. These are parties that are important for the cabinet to get the bill through the Senate. These parties are afraid of a 'disaster in slow motion'; 1.7 million workers do not accrue a supplementary pension under the new rules either. GL and PvdA are also concerned about the balance surrounding entry.

Minister Schouten will answer the questions on Thursday 15 September. We are watching with great interest from APG.

What is the Law on the Future of Pension?

The Netherlands is heading towards new pension rules. The current pension scheme promises everyone a fixed amount upon retirement. This forces pension funds to retain high financial buffers because nobody knows what unexpected events await us in the future. These mandatory to be retained buffers were one of the reasons why almost none of the pensions could be raised in the recent past, despite good investment results and a thriving economy.

With the Law on the Future of Pension, another system will enter into force. The new rules allow everyone to accrue pension by means of a contribution scheme. This pension establishes how much money (contribution) an employee and his or her employer deposit into the pension. In that system, the amount paid upon retirement is not fixed. However, there are agreements made on a goal. The funds will regularly check whether the future goal is feasible with the current contribution.

The contribution paid will be invested. Younger people have more time to compensate for windfalls and setbacks towards the future and older people have a lot less time. That is why the money is invested differently according to age group. That's how everyone accrues a personal pension capital as it were. Because the payments may differ in height, the pension can be raised quicker when the economy is doing well. When the economy is doing not so well, the pension can also be lowered. Most pension funds opt for an arrangement in which truly major financial setbacks can still be compensated collectively. That is called the solidary contract. In this contract, the pension fund has several instruments available to prevent or to limit fluctuations in the pensions. The alternative is a so-called flexible contract, in which the individual is able to make more choices but which provides less room to share setbacks together.


To whom will this new Law on the Future of Pension apply?

Almost everyone will be confronted with this law at a certain point in time. The law applies to everyone who will be accruing or has already accrued pension in the Netherlands through an employer, and also to all people who are already retired.


Why are the new rules on pension necessary?

Pension funds were barely unable to raise the payments in the past years. This has to do with the fact that the rules require pension funds to retain large buffers. Pensioners saw their costs of living increase every year, but not their pension. And that despite the fact that the economy was booming and the revenues from investments were growing. Many people believed this to be unfair. If the promise of fixed pension benefits disappears with the new law, there is more room for an increase of the pensions. 

A second reason for a new pension system is that the Law on the Future of Pension responds to the fact that more and more people change jobs more often, don't work at all for a while or start their own business.

The third reason is transparency: it is unclear to many people how much they pay towards their pension and how much they accrue. The employee will be provided with an overview in the future showing how much money is reserved for him or her in the pension pot for pension and how this capital develops as a result of the contribution paid and the returns achieved.


What is the role of APG in all of this? 

APG is a pension administrator. We work on behalf of pension funds, such as ABP and bpfBouw, and for the participants and employers who are affiliated with these funds. 

For four of our pension funds, we invest the contributions paid by participants and employers into those funds. We do so in the most sustainable way possible, with the lowest possible risks and while achieving the best possible returns.

In addition, we execute the administration for all eight affiliated pension funds. We make sure to collect the contributions and to pay the pensions in a timely manner. Moreover, we take care of the communications of the funds with their participants.

APG, together with the funds, has been working on the preparations for quite some time now to allow for a careful and organized switch from the current to the new scheme later on.


What would be the effective date of the Law on the Future of Pension?

This is one of the topics the members of the House of Representatives of the Netherlands will be discussing. Minister Carola Schouten announced that she would like the law to be handled before the end of this year by both the House of Representatives and the Senate of the Dutch Parliament and to become effective starting January 1, 2023. The pension funds, social partners and pension administrators will then have 4 years -until January 1, 2027- to adjust the pension schemes to the new legislation.


Is there a chance that the House of Representatives of the Netherlands will not consent with the Wtp?

It is expected that the coalition parties at least will vote in favor of the law because this intention is established in the coalition agreement. The question is how many other parties will vote in favor of the law. This new law is very comprehensive and many members of the Parliament find the matter complex. Some indicate they want more time to study the law properly. Others indicate they want more information. The coalition has the majority in the House of Representatives of the Netherlands, so we expect the law to pass. Following the votes in the House of Representatives of the Netherlands, the law is yet to be discussed in the Senate of the Dutch Parliament. The coalition has no majority in the Senate of the Dutch Parliament, meaning it is also important for the other parties to vote in favor of the law.


What happens if the Senate of the Dutch Parliament does not consent with the Wtp?

In that case, the government has to decide whether or not it wants to implement the proposal or if it wants to satisfy the objections of the Senate of the Dutch Parliament. In the latter case, the government may opt for an adjusted legislative proposal that then first has to be discussed again by the House of Representatives of the Netherlands. That would mean the implementation of the law will more than likely be postponed.


Would you like to know more about the new pension rules? Check out onsnieuwepensioen.nl