NETHERLANDS - Employers with businesses in the Netherlands might need to adjust their executive pension arrangements if Dutch lawmakers approve additional tax restrictions backed by the government, Towers Perrin has warned.

The consultant today said under the proposals, which are currently under review in the Dutch second chamber, some employers may need to cap pensionable pay under their final salary plan at €500,000.

The legislation, scheduled to be introduced in January 2010, requires employers operating a final-salary pension scheme to pay a new tax of 15% on four times the amount of pensionable pay for executives making more than €500, 000, which will be indexed annually.

Rene Overtoom, a pension lawyer with the consultant in Amsterdam, told IPE he expects the law to win approval by the end of this year.

As a result, he suggests employers should start listing how many employees would fall under the arrangement, and approach them to arrange a deal, since this is a tax that is payable by the employer.

"The employer could split the arrangement and use a final-pay plan up to the maximum of €500,000, and everything that comes above that could be put into a career average system or a money purchase scheme," said Overtoom.

The measures are part of a wider initiative, announced in March this year and to be rolled out from next year, to encourage employers to cap severance and retirement packages for highly-paid executives.

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