Dutch pensions legislation - changes ahead
Dutch civil law states that, in case of a merger or takeover, rights and liabilities coming from a current employment contract have to be transferred to the new company. The company’s assets and liabilities are also transferred. Pension rights, though, are an exception. It has to be put in writing explicitly if these are to remain valid, will be altered or even replaced altogether.
The current legislation finds its source in the European Directives dating 1977. However, in June 1998 an amended directive was issued, stating that a member state can opt not to include this exception for pension rights in its national legislation. As a result, in October 2000 a bill was introduced and put down in law the obligation to transfer a company’s pension scheme in case of a merger. In this way employees’ conditions and benefits will be secured.
Recently a memorandum on the proposed amendment has been published. It indicates that politicians are in agreement on the main features of the plan. The bill is not expected to take effect before July 17 this year.
Although this will be a favourable development for Dutch pensions, the advice of the Dutch Socio-Economic Council (SER) published on May 18, is believed to have an even greater impact. Why so?
At the beginning of May the Dutch minister for social services and employment consulted the SER on a couple of new features to be implemented in pension law. The Dutch government intends to enhance transparency of pension legislation and to obtain this proposes to modernise the Pension and Savings Funds Act, revise it on technical matters and adjust policymaking. The starting point for these amendments will be the object of securing employees’ pension rights.
The SER’s advice on these features is quite radical: it supports the government’s intentions to modernise the Pension and Savings Funds Act, but goes much further – proposing a completely revised law on pensions. It reasons that supplementary pension benefits have to be considered as conditions of employment. According to the SER, the government’s responsibilities lay mainly in the field of guaranteeing status and tax counselling.
Concerning the guarantee of position the SER distinguishes three different areas:
q Financial security, which applies to regulations to secure pension capital. This contains regulations concerning the position of pension funds in the Pension and Savings Funds Act, the participant’s right of choice for investing pension rights and the position of the general manager and/or large shareholder.
q Security of implementation implies regulations on pension funds and insurers and supervisory policy and mainly covers relations between the employer and the company’s pension fund, indexation policy, capital surpluses and deficits.
q Individual security has to be guaranteed for groups of participants and individuals within these groups. Within this framework the following issues are mentioned; diminishing the number of people precluded from pension rights by means of a company’s general pension regulations, international value transfers.
Ruud Derksen is a legal adviser with Consultas in the Netherlands, part of MGAC network