The Future of Pensions Act (Wtp) was passed definitively by the Senate on Tuesday night. With 46 votes for and 27 against, a long period of uncertainty comes to an end. One of the biggest system changes in the Dutch financial sector can now really get underway. The new Pensions Act will go into effect on July 1. APG aims to have transferred all affiliated pension funds to the renewed system by 2027. APG CEO Annette Mosman: “Together with pension funds, social partners and other administrative bodies, we can now really start making some decisions.”
Passage of the law paves the way for the most sweeping systemic reform since the first Pension Act in 1922. The Wtp, which will officially take effect July 1, 2023, stems from the 2019 pension agreement, which was reached after years of negotiations. The renewed pension system is more future-proof and better suited to the current labor market, in which people change jobs more frequently. Moreover, an important difference from the current system is that pensions can move with the economy more easily. For people nearing retirement or already retired, pension funds can ensure that these fluctuations are minimal. The good aspects of the current system, such as mandatory participation and solidarity, will remain in place.
Not a done deal
The WTP has supporters and opponents in the (political) Netherlands. That certainly did not make its approval by the Senate a foregone conclusion. Just last week, Minister Schouten decided to give pension funds and pension administration organizations an extra year for the transition to the new system, because concerns remained about the feasibility of transferring pension and equity administration on time. Administrative organizations and social partners now have until 2028 to adapt the schemes to the new legislation and have the pension funds switch to the renewed system before that time.
Annette Mosman emphasizes that the original date of January 1, 2027 is still achievable and that APG will remain on target for that. “We are on schedule. Although an extra year is certainly nice for the sector, because there is plenty of work to do.” She considers it good news that the law has now been passed. That ends a period of uncertainty. Mosman: “A lot of us at APG have been busy with the preparations for several years. We have contributed ideas and input. And each time, we had to keep working with scenarios - with all the uncertainties that entails. Now we don't have to do that anymore. We finally know where we stand and can now focus all knowledge, competencies and resources on the implementation of the new Pension Act.”
The coming period will focus on the interplay between social partners, funds and administrative organizations, says Mosman. “The law is here now. And that is just the beginning. The schemes can be further fleshed out by the social partners and the funds. As an administrative organization, it is important for APG to be close to that. To continue to interpret the consequences of certain choices and to help pension funds and their social partners make those choices.” Mosman emphasizes that appropriate steps have also been taken with regard to those schemes - partly on the basis of various scenarios.
APG wants to make the transition to the new system as early as 2025 with two of the eight affiliated funds, after which the other six will follow in phases. An immense operation, partly because the current system will continue to 'run' alongside it. Mosman previously called it “keeping two factories open.” “The changes behind the scenes are much bigger than what the participants of the pension funds we work for will experience,” she says. “And that makes the system change a major challenge. Maintaining balance between current and new administration will be essential for us. We are therefore taking our steps in close cooperation with the pension funds.”
In the renewed system, as a member of a pension fund, you see directly how much money has been set aside for you. There will no longer be an entitlement, but a personal pension capital. Mosman: “In the coming years, APG will convert past entitlements into personal pension assets for the nearly 5 million participants of its pension fund clients. A task we are tackling with both hands. In fact, we are excited about it! We will ensure that we move our funds’ participants to the new situation in a controlled and timely manner. In the process, we will pay full attention to explaining everything as thoroughly and as clearly as possible to those same participants. We have been preparing for this transition for years and our schedule is on track. So, it’s going to work. First take a day to breathe and enjoy the good news. And then, let’s get to work!”