Dutch pensions supervisor De Nederlandsche Bank (DNB) has argued that the proposed legislation of a 10% lump sum withdrawal at retirement would come at the expense of participants of underfunded schemes.

As surpluses and shortfalls at pension funds don’t have to be taken into account when requesting such withdrawals, this could lead to “undesired selective behaviour”, the regulator stated in a response to the consultation on the country’s recent pensions bill.

DNB noted that retiring participants would get an additional stimulus to avoid a looming rights cut, “as they would actually receive more than their pension fund has available”.

It also argued that taking out a lump sum at underfunded schemes would further put a pension fund’s financial position at risk.

The association of pension specialists (KPS) said it wondered why taking out a lump sum would be possible at underfunded schemes, whereas individual value transfer of pension rights was not allowed in such a situation.

Trade union VCP, in contrast, argued that participants using the lump sum option at well funded schemes would miss out on indexation over the amount taken out.

Earlier, tax experts argued that the new lump sum option at retirement would unlikely be beneficial because of a higher taxation.

The Dutch order of tax advisers (NOB) suggested that the lump sum could turn out to be disadvantageous, as people could end up in a higher tax band, or lose housing benefits and care subsidies.