Doing Business in the Netherlands 2012 - American Chamber of ...

Doing Business in the Netherlands 2012
15.6.3 Several Ways to Finance Second-Tier Pension Benefits
There are several ways in which pension benefits can be financed,
either through:
� a defined benefit (DB) system that can be formed as a final
pay system or as an average pay system; or
� a defined contribution (DC) system, either individual or
collective.
15.6.4 Final Pay System
Under the Final Pay System, the pension accrued is a fixed percentage
of the pensionable base (pensionable salary minus franchise)
applicable in the initial year as of the commencement date of service
or the commencement date of the pension plan. With regard to future
increases of the pensionable salary, pension claims are allocated to the
previous years of service from the commencement date of
employment or of the plan (past services). Therefore, the amount of
the old-age pension depends on the employee’s last salary prior to the
pension date, the years of participation in the pension plan and the
franchise.
15.6.5 Moderate Final Pay System
To prevent a situation in which salary increases at a later age will lead
to major pension cost increases, the final pay system often includes
provisions to limit the costs. A frequent provision stipulates that the
pensionable salary after a certain age (55 or 60 years) will be taken
into account only with respect to future years of service.
Alternatively, it may be determined that promotions after the
employee reaches a certain age (55 or 60 years) no longer count for
pension increases, but only the usual periodic salary increases.
Employers have to be aware that these kinds of stipulations might be
in conflict with Dutch equal treatment law.
Baker & McKenzie 141