NETHERLANDS - Dutch workers paid 7% less into their tax-friendly ‘levensloop’ or life course saving plans in 2008, latest figures reveal.

A total of €783m was deposited into levensloop accounts last year, which is €2,900 per participant on average, according to Statistics Netherlands (CBS) and the Dutch Association of Insurers (VvV) to give around 270,000 participants combined levensloop savings of approximately €2.5bn.

Participants deposited €914m in 2006, when the tax-friendly savings scheme was introduced, and €844m in 2007, said CBS and VvV.

According to the institutions, the deposits remaining at the end of the year were in part offset by €113m taken out by policyholders to cover parental and sabbatical leave, and used to finance leave taken from work last year for care and education.

Although the scheme is designed to discourage early retirement, employees can also use their assets for this very purpose, and plans are offered by banks, insurers and subsidiaries of pension funds via both a savings and an investment option..

The levensloop plans allow workers to save up to 12% of their gross salary each year, up to a maximum of 210% of their annual salary.

A CBS spokesman attributed the decrease in levensloop deposits to the complexity of the scheme and in part because employers have to agree that leave can be taken.

“Moreover, uncertainty about the continuation of the scheme in its present shape might also have been a factor,” he claimed.

In the opinion of Professor Lans Bovenberg of Tilburg University, the general uncertainty following the financial crisis, is also playing a role.
“People prefer to have their money directly available, instead of having it tied up in a scheme they can’t use when they are without a job,” explained Bovenberg, who is one of the designers of the levensloop scheme.

Pension experts have suggested the levensloop be altered, or even merged with the ‘spaarloon’, another other tax-friendly savings scheme, in a bid to improve the disappointing uptake.

CBS and VvV noted the total deposits for spaarloon were also down by 7% last year, to just over €1bn.

“We think that employers are discouraging workers from taking part because employers must now pay 25% tax over the amount saved by employees,” said the CBS spokesman, who explained that the tax rate has been gradually raised from 0%, as the scheme has become more popular.

The spaarloon allows employees to save a maximum of €613 a year tax-free, which they can be spent as they choose after four years, although investors are not allowed to deposit money in both the spaarloon and the levensloop during the same year.

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