Dutch Supreme Court rules that pension rights 'cannot expire'
NETHERLANDS - In a legal appeal widely anticipated by pensions lawyers, the Dutch Supreme Court has ruled that pension rights cannot expire.
The case involved a Dutch worker's pension rights accrued in 1988-89 at the €10bn industry-wide pension fund for professional road transport (Pensioenfonds Vervoer).
Over this period, the participant's employer failed to deduct the worker's contribution from his salary. It also failed to pay the pension fund the contribution owed for its employee, a mandatory participant in the scheme.
Although Vervoer did grant pension rights over the period 1990-95, it determined that the claims for 1988-89 had expired.
According to the Supreme Court, the pension fund failed to make inquiries into why the worker's employer had not paid the required premiums, even though it had known the employee was a participant of the scheme.
"Therefore," it concluded, "the risk of non-payment lies entirely with the pension fund."
Teun Huijg, pensions lawyer at law firm Stibbe, said: "The verdict is of great practical importance for pension funds that haven't explicitly made the pension accrual dependent on, for example, the actual registering of the accrual."
He said this would apply for most schemes.
"Whether somebody is accruing a pension usually depends on meeting certain criteria separately from the pension fund, such as being an employee, reaching an entry age or passing a qualifying period," he said.
"The Supreme Court seems to indicate that, in these cases, there is an 'automatic' accrual, regardless of whether the scheme has granted the pension rights, as long as the criteria are met.
"In fact, the Supreme Court says that, in these cases, pension claims that have been accrued but not registered cannot expire during the accrual phase."
Huijg recommended pension providers check their rules and regulations and maintain extensive administration for a longer period of time.
However, he added that the Supreme Court ruling included the option of adding new clauses to pension funds' regulations spelling out that participants would accrue pensions only after they had registered or paid contributions.
He said the Supreme Court's decision on the matter had been widely anticipated among pensions lawyers, as lower courts had passed a number of contradictory verdicts in similar cases in recent years.