After a thorough debate, the Senate also approved the new pension law on Tuesday, May 30. The new pension law should ensure that pension accrual becomes clearer and more personal. From now on, a participant's pension will consist of all premiums deposited on behalf of the participant, plus the return that these assets generated.
What is changing is that the contributions made by workers throughout their careers will benefit their own pensions. Under the previous system, most pension accrued at the end of one's career and was effectively an implicit subsidy from young to old. Changing jobs or unemployment therefore had additional major consequences at the end of one's career. In this way, the new law is more in line with the fact that people today no longer stay with one employer for 40 years. Incidentally, the starting point remains that we build up pensions together.
Is the dga also considered?
In designing the new law, much attention has been paid to a more transparent pension system, survivor's pensions and self-employed workers. However, the question arises whether attention has also been paid to the dga. What (new) options does the dga have for building up retirement provision within the new Future Pensions Act?
Within the Bill on Future Pensions, only premium schemes with a flat premium still exist. Therefore, if a director and principal shareholder wants to set up a pension plan from 2023, the defined contribution plan is the only possibility to do so. However, we should note that this is not a new phenomenon. In fact, this has already been the case since the abolition of self-administered pension options.
The defined contribution plan under the new pension law means that the employer promises in advance a premium amount that is the same for all employees, regardless of age ("flat premium"). So the amount of premium to be deposited is known, but the amount and form of the pension to be received in due course is not. An important advantage of the new Future Pensions Act is that the tax maximum contribution limit will be 30%. This means that the dga can use a maximum of 30% (up to the maximum amount) of his annual salary for pension accrual with tax relief. This will be sufficient for most directors and shareholders.
Sample annual margin calculation
Mick is dga of a construction company and enjoys an annual salary of € 100,000. Based on this salary, his annual margin for 2023 amounts to € 25,907 ((€ 100,000 - the AOW deductible € 13,646) x 30%). Incidentally, the maximum annual margin in 2023 is € 34,550 ((€ 128,810 - AOW deductible of € 13,646)*30%).
In addition to the annual margin, the reserve margin was substantially increased in 2023. At a salary of €100,000, this amounts to €63,907, composed of €25,907 annual margin and €38,000 catch-up deduction. Of course, a lower amount of additional premium contributions can be chosen.
Pension accrual through bank savings
In general, bank savings are a good way for directors and shareholders to build up an external retirement provision outside the sphere of risk. Now that self-administered pensions have not been possible for some time, bank savings products and annuity provisions are the only ways for directors and shareholders to make use of the 'reversal rule' (premiums are deductible now, entitlement will be taxed in due course when paid out).
By making a deposit into a bank savings product or annuity provision, one loses the power of disposition of the assets in question. This may be perceived as a disadvantage of this route (compared to regular savings or investments), but from the point of view of retirement provision it is an advantage (assets are truly set aside).
Hedging of survivor risk
Also consider hedging the survivor risk. This means that the director's surviving partner can continue to provide for his/her living expenses even if his/her partner (the director) drops out due to unexpected death. For this purpose, one can take out death risk insurance on the life of the DGA.
Disability insurance requirement for self-employed workers
In addition to the aforementioned aspects, the statutory disability insurance obligation for the self-employed is also part of the Pension Agreement. This obligation to insure against disability risk will also apply to dga's. This law is scheduled to take effect in 2027.
Mandatory disability insurance covers 70% of last-earned income. The large number of uninsured self-employed workers calls for a regulation. Now many self-employed people have to rely on welfare in case of a calamity, effectively passing their disability risk on to society.
Whether this proposal will pass, by the way, remains very much to be seen. We recall the Disability Insurance for the Self-Employed Act (WAZ). This law provided for compulsory insurance of the self-employed between 1998 and August 1, 2004. The coverage and premium were similar to that of the insurance now proposed. However, the scheme in question was scrapped because the premium was considered too high and the benefit too low. The cabinet went for freedom of choice. History repeats itself. The reasons for abolishing the WAZ are now put forward by the opponents of the new compulsory insurance. For example, there are the necessary self-employed who do not need insurance at all. For example, because they are wealthy or because their partner has sufficient income. That is the disadvantage of legislation in which everyone is lumped together.
Finally
Although the new pension law does not pay specific attention to the dga, we see the importance of continuing to follow developments with an oblique eye. In particular, the widening of the annual margin for tax purposes may be interesting for building up retirement provision under tax-favorable conditions.
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