Building a pension, rather important for us women. On average, we accrue 40% less in retirement over our lifetimes and thus have a huge drop in income after retirement age. In addition, many couples – unfortunately – break up and we women are living longer. So a good pension is essential to have your sheep on dry land even after your career. The Future Pension Act (Wtp) was recently passed, what does this mean?
This article was written by Nihal Vogels, financial planner. Contact Nihal if you would like 1-on-1 help and advice around your financial situation.
Future Pension Act (Wtp), what does it mean?
The Wtp is new legislation that affects the pension system in the Netherlands. Its goal is to future-proof the pension system and provide more flexibility and choice for employees.
The central government states the following regarding flexibility: “The law has 3 goals: a supplementary pension that rises faster, a more personal and clear pension accrual, and a pension system that better reflects that people no longer work 40 years with 1 boss.”
How does building a pension work again?
When it comes to your retirement, the Netherlands has 3 pillars:
- AOW pension. This is our beautiful social system, and we all get AOW.
- Collective Retirement. This is the pension you accrue when you are employed.
- Supplementary pension. Here’s what you can do yourself that will help you close your retirement gap.
The changes around Wtp mostly apply to pillar 2, the collective pension. But there are also changes in the other pillars. We list the most important ones below:
Fairer treatment
The Wtp aims to reduce gender inequality in retirement. Women often have fewer pensions due to part-time work, career breaks and lower wages. The new law hopes to achieve a fairer distribution, reducing the pension gap.
More choice and flexibility
The Wtp gives women more choices in how they accrue and draw their pensions. For example, you can decide how much you put in and retire earlier. This allows you to better tailor your retirement to your situation and needs.
Understandable information
Pension information is made clearer and easier to understand. This is especially important for women, who have often been less involved in their finances, including retirement. Better information allows you to make better decisions about your retirement and what it means for your future.
Partner’s pension
There is more focus on the partner’s pension. This benefits women because they often rely more on their partner’s pension. The new rules seek to better protect the partner’s pension, such as in the event of divorce or death of the partner.
One-time payout
Another big change is the ability to have a larger sum of money paid out once. This change does not stem from the Future Pensions Act and is not likely to take effect until July 1, 2024. So soon, if this goes through, you will be able to withdraw some of your retirement money in one lump sum. This applies to both the pension you accrued with an employer (pillar 2) and the supplementary pension (pillar 3).
At that time, you can choose to withdraw, at the start of the benefit, up to 10% of the accumulated amount, in 1 installment. This comes in handy when you need a larger sum of money for that dreamed wooden house, a nice trip or a remodel.
More room to build your own retirement, yes!
If you work for an employer, you accrue pension in pillar 2. Often you can build up extra pension, supplementary pension, in pillar 3. This is very smart for us women because we have that pesky retirement gap. Are you an entrepreneur? Then it is hugely important anyway that you accrue pension in pillar 3. Find out how to build up your own (additional) pension.
The good news around building your own retirement is that the annual allowance is going up! Read all about annual allowance here. That means you may deposit more, but the tax benefit remains the same, so you enjoy more tax savings! Read again here to find out exactly what that tax break is like.
When do the changes go into effect?
The WTP went into effect July 1, 2023, but only now can all pension providers start making adjustments for your pension. It takes time to implement the changes and you won’t notice everything right away. It is wise to inform yourself well about the implications of the Wtp. Are you an entrepreneur and do not build up a collective pension, pillar 2? Then it is important to inform yourself well about building a pension in pillar 3.
Do you also want to get started on getting your affairs in order financially, but no idea where to start? Start with Elfin by receiving your personalized roadmap for free.
Based on your needs, knowledge and goals, we will present you with the first steps that will help you become financially independent. Get started right here.
