Highlights of the government’s plans feature the following:
- The new pensions system wouldn’t link premiums to a member’s age. All pension contracts would be based on a premium arrangement, and the tax system would reflect this change. The fiscal arrangements for the second and third pillars would converge.
- A legal framework would be designed to transition pension plans to the new system. Employers would have to draw up a transition plan in consultation with employee representatives and employees. This step likely will be complex because the economic value of pension accrual will shift from the current age-dependent system.
- The government would examine the possibility of allowing the current defined contribution framework to provide more risk-sharing opportunities — for example, through the provision of a collective pension buffer financed by a solidarity premium.
- Pension providers would have to carry investment risks for all types of pension contracts for former participants based on a life-cycle approach. The reforms would allow vested pension benefits to transfer to new pension contracts. To this end, a valuation framework would value an individual’s pension benefits to provide a personal — or starting — capital. The transfer to a new contract would be optional, but if it’s not done, different pension providers would have to provide for the existing pension entitlement and new pension accrual.
- Individuals could partially withdraw accrued capital (up to maximum of 10%) on retirement. The government will examine other options — for example, the use of some pension premiums or capital to finance a mortgage.
- Self-employed people wouldn’t be required to join a pension fund, but voluntary membership will be considered. The government also will look at other options to encourage self-employed people to accrue pension savings.
- The legal and fiscal rules for pensions paid out to surviving dependents would be overhauled, and coverage gaps reduced, for example, following a person’s resignation, divorce or change of employment. The government already has launched a consultation with the social partners.
Pending agreement to the revised pension system, the government is unwilling to change the valuation rules for pension funds and, for now, a reduction of benefits remains possible. The new system would ensure the continuation of mandatory industry pension funds.