The Wtp is not the final destination: 7 developments to come
Publication date: 27 October
Many employers and pension providers are currently focusing on one objective: adapting their pension scheme to the Future of Pensions Act (Wet toekomst pensioenen, Wtp) before 1 January 2028. This is understandable. But this does not mean that developments within the Dutch pension market will come to an end.
The Wtp makes pension schemes more transparent, more personal and, above all, easier to compare. A market is emerging in which differences are becoming increasingly visible. This may set developments in motion that go beyond the pension system reform itself. We see seven main themes and developments.
1. Greater harmonisation within organisations
Many employers have multiple pension schemes alongside one another as a result of mergers, acquisitions and historical arrangements. Now that virtually all schemes are becoming defined contribution schemes, many technical differences are disappearing. This makes it easier to compare existing schemes, while at the same time making it more difficult to continue to justify significant differences between groups of employees. This may set a new wave of harmonisation within organisations in motion.
2. Pensions will become a genuine employment benefit
For years, pensions were an employment benefit that was difficult to compare. Under the new system, it will increasingly come down to a limited number of recognisable elements: how high is the contribution, who pays the contribution and how high is the partner’s pension? As a result, pensions will become easier to understand and compare for employees, works councils, recruiters and directors.
Employers have been benchmarking salaries, company cars and other employment benefits for years. Because of its complexity, pensions have often remained outside these comparisons. This may change. A scheme with a savings contribution of 22% can be compared more easily with a scheme with a savings contribution of 14%. Employers will therefore increasingly compare their pension scheme with those of competitors, while employees will take a more critical look at the savings contribution their employer actually makes available for their pension.
This transparency will create market pressure. Employers that are clearly below the market will face more questions about their pension scheme. Employers that are above the market, on the other hand, may take a more critical look at their cost structure. Differences that were previously hidden behind different pension systems will thus become much more directly visible.
3. From pension scheme to pension ambition
The discussion about pensions often focuses on the technical characteristics of the scheme. As the Wtp reduces the differences in scheme design, the discussion may shift towards the underlying pension ambition. The savings contribution made available by the employer is important, but equally important is the associated ambition in terms of the ultimate pension level. This is evident for the insured partner’s pension, as this is expressed as a percentage of pensionable salary.
This also changes the discussion about pensions as an employment benefit. The structure of the scheme will no longer be the main focus. Instead, attention will increasingly shift to what an employer aims to achieve with its pension scheme. The contribution, partner’s pension and other characteristics of the scheme then become the means of shaping that ambition.
4. Individual additional pension savings will become more important
The shift towards pension ambition is not limited to the employer. Employees will also need to consider more explicitly what level of pension they themselves want to achieve and whether the collective scheme is sufficient for this purpose. The transition to flat contribution rates makes differences in contribution levels, and therefore in potential pension outcomes, more visible. With a relatively low contribution, the question may arise sooner whether additional individual pension savings are necessary or desirable. Pension provision will become a combination of what the employer facilitates and what the employee additionally accumulates individually.
5. Fewer domestic providers, more foreign providers
The number of pension funds has been declining for years. This consolidation may continue after the pension transition. As schemes become easier to compare, differences in costs, services and scale will also become more visible. This may increasingly raise the question of whether smaller pension funds will still have an independent reason to exist in the long term.
A similar development may occur among insurers and PPIs operating in the Dutch market. Less customisation and greater standardisation increase the importance of scale. When the pension product itself becomes less distinctive, competition increasingly shifts towards technology, services, administration and price.
Greater standardisation may actually lower the barriers to entering the Dutch pension market. Whereas the market has traditionally been strongly organised on a national basis, foreign software providers, administration platforms and other service providers may find it easier to play a role. After all, as pension products become more alike, technology, scale and efficient administration become increasingly important competitive factors.
6. New questions concerning mandatory participation
As the contribution level becomes an increasingly distinguishing element of a pension scheme, the question of whether the pension provider itself must also be prescribed becomes more relevant. A new system is conceivable in which social partners within an industry collectively determine the pension contribution and other essential characteristics of the pension scheme, while employers are given more freedom in choosing the pension provider. This would, however, require a fundamental change to the current statutory system, which, in the case of mandatory participation, requires participation in the designated industry-wide pension fund.
7. The maximum tax-facilitated contribution rate of 30% is not fixed forever
The end of the pension transition does not mean that developments in contribution rates will come to a standstill. The maximum tax-facilitated contribution rate of 30% is not a percentage that is fixed forever. The statutory tax framework includes an adjustment mechanism, meaning that the maximum will change in the future. Employers that currently design their pension scheme at or around the maximum tax-facilitated contribution rate should therefore take into account that the tax framework may also change after the Wtp transition.
