The Netherlands is in the midst of its transition to the new pension system. The Future Pensions Act has already taken effect, but pension funds, insurers, and pension providers are not all switching to the new pension scheme at the same time. Pension schemes must be adapted to the new system by 1 January 2028 at the latest.
This transition is relevant for employers. Employees may ask questions about their pension position, possible pension compensation, and the consequences of leaving employment or changing jobs. This is especially relevant for employees leaving employment in 2026 or 2027, as many pension schemes are being adjusted during this period.
What is changing, broadly speaking?
Under the old pension system, many schemes used what is known as the “average system” (doorsneesystematiek). In short, this meant participants in a pension scheme built up pension collectively in a particular way. Younger employees contributed relatively more to the system, while older employees benefited relatively more from the accrual method.
Under the new pension system, pension accrual is structured differently. It relies more on personal pension capital and an age-independent premium. This makes it clearer for participants what pension capital is being built up for them and how that capital is expected to develop.
The transition to the new system can work out unfavourably for certain groups of employees. This applies in particular to employees in the middle of their careers. They have participated in the old system for many years but may benefit less, due to the change, from the advantages they would have had later under the old system. Pension compensation can be agreed for this group.
What is pension compensation?
Pension compensation is intended to fully or partially offset the disadvantage caused by the transition to the new pension system. It is therefore not a general allowance that every employee is automatically entitled to.
Whether compensation is granted, and if so to whom and in what way, depends on the applicable pension scheme and the transition plan. Factors that can play a role include the employee’s age, the transition date of the pension scheme, the chosen compensation method, and whether the employee is still an active participant at the relevant time.
Compensation is often structured within the pension scheme itself, for example through additional pension accrual or an extra contribution to the personal pension capital. In that case, the employee does not receive a separate payment from the employer, but the compensation is processed through the pension scheme.
Why is this relevant when an employee leaves employment?
When employment ends, active participation in the employer’s pension scheme also ends, in principle. Pension already accrued is retained. However, future pension accrual and any future pension compensation may be reduced or lost entirely if the employee is no longer an active participant.
This can be particularly relevant when an employee leaves employment before the employer’s pension fund has switched to the new pension system. In such a situation, the employee may not receive compensation from the old pension fund, because they are no longer an active participant on the transition date. If the employee then joins an employer whose pension fund switched earlier, it is possible that no entitlement to compensation exists there either.
In practice, this risk is also referred to as a possible “pension gap”. Its scale varies significantly by employee, pension scheme, and pension fund. Without concrete information from the pension provider, it is usually difficult to establish whether pension disadvantage genuinely exists and how large it is.
Can an employee recover missed pension compensation from the employer?
An employee is not automatically entitled to a separate payment from the employer for missed future pension compensation. If the compensation forms part of the pension scheme, it is, in principle, awarded in accordance with the terms of that scheme and the transition plan.
The mere fact that an employee misses out on future compensation by leaving employment does not, therefore, automatically mean the employer must separately reimburse this amount.
That said, pension disadvantage can still play a role in individual cases. Think, for example, of situations where the employer has provided incorrect or misleading information, has made specific commitments about pension compensation, or where specific arrangements have been made in an employment contract, collective labour agreement, pension agreement, or settlement agreement. A concrete and well-substantiated pension disadvantage can also become a relevant point of discussion during negotiations on a termination arrangement.
What does this mean for employers?
Employers would do well to establish in good time which pension scheme applies, when the switch to the new system will take place, and whether the transition plan includes a compensation arrangement. It is also important to identify which groups of employees may be eligible for compensation and whether active participation is required to receive it.
In the case of a termination by mutual consent or a proposed dismissal, pension compensation can become a point of negotiation. Employees may argue that they are missing out on compensation because of the timing of their departure. In such cases, it is important for employers to communicate carefully and not make any guarantees about the employee’s personal pension position.
A practical approach is to refer the employee to the pension fund or pension provider for a personal assessment. If an employee claims significant pension disadvantage, it makes sense to ask for written substantiation from the pension provider. Only then can it be assessed whether the alleged disadvantage is concrete and plausible.
Do you have questions about the Future Pensions Act, pension compensation, or its consequences when an employee leaves employment? Please feel free to contact one of our employment lawyers.
