On 1 January 2006, the tax advantage of the VUT and other early retirement programs in the Netherlands was abolished. Since then, the applicable pension scheme in place has been designed to offer employees a bridge payment until they reach pension age, in the form of an Early Retirement Scheme (“RVU”). The pension agreement of June 2019 eased certain requirements of the RVU. These changes are included in the “Wet bedrag ineens, RVU en verlofsparen” (Lump Sum Payment, Early Retirement and Leave Savings Scheme) bill, which is currently passing through the Dutch House of Representatives.

De facto early retirement scheme

A de facto early retirement scheme arises when employers offer employees a redundancy package with the sole purpose of facilitating their early retirement. This type of RVU enables employees to bridge financially the period until they retire. There is an employer penalty for this type of RVU. The Tax Administration imposes a levy, which since 2011 has been 52% of the severance or transition payment. The definition of early retirement (VUT) appears very broad. However, no penalty for an RVU applies if an employer lays off employees for economic reasons. Nor does an RVU exist for non-age-related dismissals—e.g., for poor performance, conflict in the workplace, or employment policy violations. The burden of proof lies with the employer.

Relaxation of RVU

For the time being, the relaxation of RVUs under the pension agreement mentioned above offers employers the possibility of agreeing to an early retirement scheme with older employees who want to retire early without the application of the 52% final levy. This temporary relaxation applies to employees who could not have anticipated the raising of the state pension (AOW) age or are incapable of working up to the state pension age for health reasons.

Conditions and bases for relaxation of RVU

• generally, employers need not verify whether the employee at issue is actually capable of working up to the state pension age;
• the scheme covers employees who will reach state pension age within three years;
• the relaxation is a temporary measure designed to come into effect on 1 January 2021 and expected to last until 31 December 2025;
• there is a gross exemption of EUR 19,000 per annum (above this, the RVU levy still applies);
• for the exemption to apply, all payments relating to the RVU levy must be made by 31 December 2025;
• parties may agree to additional terms through collective agreements.

Voluntary on both sides

The temporary relaxation of the RVU is voluntary on the part of both employer and employee. This means that both employers and employees are free to opt for this arrangement and that both parties must agree that the employee will retire and on what terms.

Take action now!

Although the Lump Sum Payment, Early Retirement and Leave Savings Scheme bill (Wetsvoorstel bedrag ineens, RVU en verlofsparen) has not yet been passed, it is a good idea to consider the implication of the RVU scheme and its implementation within your organisation. For example, the scheme can be deployed as a voluntary redundancy scheme in case of restructuring. Exploring which employees might or would want to be eligible for this early retirement scheme ensures that these employees can take advantage of this option in due course. An employer then has the option of offering an employee a certain pension amount three years before state pension age without incurring a final levy of 52%.