Dutch cut tax benefit for pensions

Holland AmsterdamThe new coalition government in the Netherlands has announced measures to further limit tax advantages for the country’s pension plans, starting in 2015 or possibly even 2014.

The maximum tax-effective accrual is reduced to 1.75% per year for average-pay plans and maximum tax-effective accruals for final-pay plans. DC plans are also likely to be affected, but details are not yet clear.

The salary that a tax-effective pension can be built upon is capped at €100,000 (US$127,000).

In July, the government first announced that the tax relief available to pension plans in the Netherlands would be reduced as of January 2014. At that time, tax relief would be provided only on pension accrual in average-pay plans up to 2.15% each year rather than the previous limit of 2.25% each year, and 1.90% for final-pay plans rather than the previous limit of 2%.

Also, the retirement age would increase to 67.

Employers with career-average-pay plans, which represent the majority of supplemental pension plans in the Netherlands, will need to be reviewed. Efforts to implement the changes announced in July 2012 are underway or already completed, and now those agreements will need to be revisited.