Understanding the Wtp: A shift to defined contribution pensions

In the Netherlands, pension arrangements aren’t mandatory unless the company’s activities fall under a mandatory pension fund or a company pension scheme is already in place. About 90% of employers active in the Netherlands currently operate pension schemes, highlighting the importance of understanding these changes. The Wtp, enacted on 1 July 2023, mandates a transition from defined benefit to defined contribution pension scheme models, requiring age-independent contributions. Under this model, the benefits accrued now depend on defined contributions, investment returns, and longevity, while defined or guaranteed benefits – with fixed pension outcome at retirement date creating funding obligations for employers—are phased out. The accrual method of survivor’s pension benefits also changes under the Wtp.

Key aspects of the Wtp transition period

The Wtp transition includes a series of milestones for employers over the next few years:

• Existing Pension Schemes:  Defined Contribution schemes with age-dependent contributions and Defined Benefit schemes in place before 1 July 2023 may continue under current terms ultimately up to 31 December 2027. Employers working within these original frameworks who introduce new Wtp-compliant elements into an existing scheme require to align the entire scheme with Wtp standards.
• New Pension Schemes: All new pension schemes implemented after the Wtp enactment must be fully compliant with Wtp. New schemes can operate alongside existing Defined Contribution scheme, if continuation is needed.
• Transition Options: Existing Defined Contribution schemes with progressive, age-related premium scales established before 1 July 2023 may retain these scales. However, by 1 January 2028, new employees must be enrolled in a fully Wtp-compliant scheme. Employers may also choose to implement a Wtp-compliant scheme for both new and existing employees at any point during the transition. But this may be accompanied by a compensation arrangement for existing employees.

Considering pension premiums and survivor’s pension

As employers work to align with the Wtp, pension providers may offer options, such as:

• For Current Employees: Retaining a consistent age-independent pension contribution and equivalent survivor’s pension rate may support uniformity and fair treatment.
• For New Employees within the transition period: Employers may either retain the existing pension scheme or create a new pension scheme that aligns with new standards. Adjustments to the survivor’s pension rate subject to Wtp may be necessary to meet evolving requirements.
  Given that modest pension premiums for an ageing workforce may lead to lower pension entitlements, employers should consider proactively informing employees about the option to make voluntary additional contributions within regulatory limits.

Next steps for employers: Compliance, consultation, and beyond

The Wtp introduces a new compliance layer. Employers may benefit from consulting pension experts to develop a strategy that aligns with both legal requirements and employee needs. Screening current pension schemes under the scope of the Wtp will help identify areas that may need adjustment.

Additionally, consultation obligations may apply to changes in pension schemes, including discussions with a works council or personnel meetings, to address employee concerns and gather feedback.

As the Wtp transition progresses, staying proactive will be essential. Employers who view these changes as an opportunity to enhance transparency and support employees’ financial futures are likely to build stronger, more resilient teams.

For guidance on meeting Wtp requirements, we are here to assist in ensuring a smooth path to compliance.

Authored by Maria Benbrahim and Mariette Vis.