Pensions – lump sum payment allowed as from 2022

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Contrary to most European countries, accumulated pension capital cannot be paid to an employee in a lump sum under Dutch law. Accumulated pension capital must be paid in lifelong annuities from the retirement date.

In order to give employees more freedom on how to use their pension capital, the Dutch Government has now proposed to allow lump sum payments to a certain extent. To this effect, a bill has been submitted with Parliament that allows for a lump sum payment equal to a maximum of 10% of the accumulated pension capital. Employees may elect to take this lump sum upon reaching their retirement date under the occupational pension plan, or in the February of the calendar year following the year the employee reached the statutory retirement age for thestate pension. It should be noted that any lump sum payment is subject to the regular personal income tax rates. As a result of the introduction of the partial lump sum payment, Dutch pension plans will likely become more attractive for expatriate employees who start working in the Netherlands.

It is expected that the bill will be adopted in Q1 2021. As a result, lump sum payments will become possible  from 1 January 2022.

No action is required by employers. Pension providers will notify employees directly at least three months before reaching the standard retirement age.

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