Flat-rate contribution scheme for new participants

Under the new pension law, employers have to switch to a 'flat-rate contribution scheme'. The same contribution percentage is then paid in for each employee. And the pension contribution for pension accrual is age-independent. From what date will this scheme be mandatory? And what do you do until then? I hear these questions more and more often.

By: Berry van Sonsbeek, Product Marktmanager Zwitserleven

Transitional right

Suppose an employer has a pension scheme with a pension insurer or premium pension institution (PPI). This employer may be allowed to use the transitional right, which allows an age-related graduated scale to still be applied for existing participants. From what point can employees no longer join this pension scheme? Initially, that seemed to be the moment the existing scheme is adapted to the new law. It later became clear that this can also still be done at a later date: no later than 1 January 2028.

Continuing with flexible contribution scheme

I assume the following situation: there is an existing defined contribution scheme (DC scheme) with an increasing contribution scale, or an average pay scheme funded with an age-related contribution rate (DB scheme). An employer may continue with a flexible contribution scheme under the new Pensions Act for all active participants in that scheme. In this case, the contribution still continues on an increasing premium scale, based on the employee's age. It is a requirement that this scale falls below the statutory 38R scale.

Up to what point is an employee allowed to join the existing scheme?

Now suppose you have adapted the existing pension scheme to the new legislation on all fronts under the transitional right (i.e. including adapting the surviving dependants’ pension). Up to what point can employees still join this pension scheme? As long as a new flat-rate contribution scheme has not yet been introduced for employees, employees can still join the old scheme or, if it no longer applies, the pension scheme that has been adjusted under the transitional right. By 1 January 2028, new participants will be covered by a new pension scheme with a flat-rate contribution. This gives some breathing space to establish a new pension scheme for employees in the period leading up to 2028.

What is best for new participants up to 1 January 2028?

My sincere question is: is it always wise to take advantage of that breathing space to set up such a special scheme for new entrants? What seems most efficient to me is to view the transition process in the bigger picture. As an employer, you may have to negotiate the pension scheme twice. First on how to apply the transitional right. And once again later on about setting up a pension scheme for new participants. All the while, there's only one available contribution budget for the employment condition of 'pension'. This means the two cannot be viewed separately. So my personal advice is: grab the bull by both horns from the get-go.