The Dutch senate has voted to approve the Future Pensions Act (FPA), allowing employers and pension fund providers to switch assets to a new defined contribution (DC) system.
The act was passed after a lengthy negotiation between the government and collective partners.
Starting from July 1, plan sponsors can convert defined benefit (DB) funds into DC plans with individual accounts for participants.
Plan sponsors have until the end of 2027 to complete the transition of DB assets into DC retirement accounts and will also have to overhaul recordkeeping to meet these requirements and create new designs for their plan participants before the deadline.
Minister Carola Schouten for Poverty Policy, Participation and Pensions said: “This is an important step. With this law, we ensure that our pension remains properly arranged, for the people who have already retired, for the people who work and for future generations.”
The act was definitively passed in the Senate, with 46 votes for and 27 against.
In the new pension system, pension providers can use the proceeds of their investments more quickly to increase pensions.
It also works the other way around: if things go badly, pensions can also be reduced, and the new pension law does provide for buffers to absorb this as much as possible.
Annette Mosman, CEO of AGP, the biggest pension provider in the Netherlands, said: “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 law comes after news earlier this month that regulatory changes in Dutch pensions led to Europe’s equity funds suffering the worst outflows of any global region in the final quarter of 2022.
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