NETHERLANDS - The Dutch Association of Company Pension Funds or the OPF is threatening to take legal action against the government over a new proposal that permits employees to cash in their pre-65 pension entitlements as a lumpsum.
“The OPF intends to examine whether it is possible to take legal action against the government if this irresponsible legislation comes before the Upper House of Parliament,” said the OPF.
The Dutch cabinet has proposed to introduce this new measure that allows participants to commute their early retirement pension rights, but social partner and/or trustees will decide if cashing early retirement pension rights will actually be possible for that particular fund. Under new plans, employees can also transfer early pension rights to old age pension rights and early retirement pension rights can be moved to a new individual arrangement called the levensloopregeling. Employees can use money from this fund if they wish to take a sabbatical.
The OPF is demanding to know how the government plans the legal implementation of the new cashing-in measure which it claims encroaches on agreements made by pension funds and social partners.
“This would erode the legal certitude and freedom of contract on pension funds with retrospective effect. In practice it would be a matter of introducing an opting-out facility with retrospective validity. Such an option violates the objectives of the present ban on commutation under the Pensions and Savings Act.”
It added: “Pension fund management is a long term business. It cannot properly thrive in an environment where the government adheres to a zig-zag line of policy. The government ought to be a stable partner. Every month we see new ideas floated in the Hague. This measure like others, will again generate a mass of extra work in the unlikely event it comes to fruition. That is why the feeling sometimes arises in the pensions industry that The Hague has become some sort of free-for-all.
“The danger is that some pension funds could be impelled by all these new regulations to throw their hats into the ring. That would mean the government risks hitching its horse behind the wagon.”
The OPF has called the new measure “ill advised” and a “deceptive bait” designed specifically to provide the treasury with windfall revenue as the payouts are subject to progressive tax.
Moreover, it claims that the long term impact would be extremely harmful to the Dutch economy and the bill would be passed on to subsequent generations. In the short term, the new measures will provoke a heightened risk of destabilising financial markets as pension funds may be forced to divest their assets to fund the payouts.
The Dutch Association of Industry-wide Pension Funds or the VB added: “The new measures will open the door to further step in the demolition of our collective pension system in the Netherlands. Also when social partners decide that commuting pension rights in the sector will not be possible, for example because of the financial position of the funds, people will hold it against the social partners and the pension fund.”
Last month, the Dutch cabinet approved the abolition of tax-cuts for pre-pension or early retirement schemes. The government wants to boost the participation of older workers in the workplace. Currently, only one-third of employees continue working between the ages of 55-65 years.
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