The new pensions law proposed by the Dutch government provides insufficient room for pension funds to cater for self-employed workers, the Dutch branch organisation of pension funds, Pensioenfederatie, has warned. It has called for a “significant change” to the draft legislation, including the option of auto-enrolment.
Several large sector funds have voiced their interest to start trials offering pensions to self-employed workers under the new pension law which will pave the way for a switch to a defined contribution (DC) pension system.
The concept law that was presented last December allows for limited trials to grant self-employed workers access to second-pillar pensions. However, the proposed legislation lacks detail and contains a provision saying any pilot trials will have a maximum duration of four years. “A missed opportunity,” according to the Pensioenfederatie.
The lack of detail is forcing pension funds that want to start their self-employed trials to wait even though they are ready to give it a go, said José Meijer, director of the Pensioenfederatie. He is therefore calling on Social Affairs minister Wouter Koolmees to speed up the legislative process.
Among other things, the lobby group wants the government to explicitly allow for auto-enrolment with an opt-out option. “In the current draft law, this is not made possible,” Meijer said.
The opt-in variant, which gives self-employed workers the initiative to save for their pension, has proved to be much less successful than auto-enrolment in other countries, she added.
“In a phase of experiments, it’s important to allow for a range of options for voluntary participation in pension funds, in order to be able to see which one works best for the self-employed in the Netherlands,” she continued.
In the Netherlands, most self-employed save very little for their pension and primarily rely on the state pension AOW in their old age. According to the government, only half of self-employed without access to second pillar pensions currently save for their pension in the third pillar.
A study by pension think tank Netspar has found that households, including those with at least one self-employed person, are much less likely to reach a retirement income of 70% of the median salary.
Besides the auto-enrolment option, the Pensioenfederatie is also asking the government to provide for a “suitable pension product for the self-employed” and a higher tax-free allowance to incentivise the self-employed to save for their pensions.
The organisation also wants it to be made easier for workers that leave their job to become self-employed to continue saving for their pensions with their former employer’s scheme. Currently, few self-employed choose this option because it’s often not possible for them to decide on the level of their contributions.
Minister Koolmees said the government is currently “in discussions” with the Pensioenfederatie, pension providers and the association for insurance companies about the design of the pension trials for self-employed workers.
“In this framework, we also talk about the possibility of auto-enrolment with an opt-out option. The other adjustments the Pensioenfederatie wishes to see are also subject of these discussions,” said Koolmees.
The government is planning to send its final draft of the pension law to parliament some time after summer.