European Union vs The Netherlands: Pension System Regulations

december 12, 2023

The Supreme Court of the European Union has admonished the Dutch government, necessitating amendments to its pension law. This decision, handed down by the Sixth Chamber of the European Court of Justice in Luxembourg on the 16th of November, censures the Netherlands for retaining the pensions of individuals relocating to another EU Member State.

The court’s ruling asserts that the Dutch pension law violates European Union agreements pertaining to the unhindered movement of employees and capital. Furthermore, it fails to align with previous agreements addressing individuals seeking to transfer their pensions to another European country.

Presently, the Netherlands imposes stringent conditions for transferring accrued pension funds to a foreign provider, rendering it nearly impractical for citizens to move their pensions following a relocation within the EU.

The European Commission notified the Netherlands in 2012, contending that the Dutch government was not upholding European regulations on the free movement of people and capital. Subsequent correspondence saw the Dutch government disputing the Commission’s rationale.

According to the Member State in question, the current legal proceedings pertain to Dutch measures addressing a cross-border scenario where workers relocate to a Member State other than the Kingdom of the Netherlands and commence a new employment relationship there. These measures aim to safeguard the pensions of migrant workers seeking to transfer the value of their acquired pension rights from the Netherlands to a pension insurance institution in the destination Member State. Consequently, these measures are directly connected to the freedom of movement for workers, with the other freedoms emphasized by the Commission considered as secondary.

This framework, primarily addressing the transfer of accrued pension rights for employees relocating to a Member State other than the Kingdom of the Netherlands, falls within the scope of the freedom of movement for workers. The necessity for a worker to choose a pension insurance institution and potentially transfer the value of their pension rights is directly tied to the exercise of the freedom of movement for workers. However, in that regard, the Kingdom of the Netherlands takes the view that the measures provided for in that legislation are necessary because there is a risk that, following the transfer of the value of their pension entitlements in a Member State other than the Kingdom of the Netherlands, certain migrant workers may ultimately emigrate to a third country where, for example, they may suddenly pay off their pension entitlements and return to the European Union or the Netherlands.

The Commission, however, asserts that the legislation applies a general rule to all migrant workers, justifiable only in exceptional cases. It contends that the risk, as asserted by the Netherlands, of workers emigrating to a third country and paying off their pension entitlements upon return to the Netherlands is minimal. To comply with EU law, the national legislation must be proportionate to the pursued objective and not exceed what is necessary for that purpose.

Moreover, the Commission argues that the scheme goes beyond what is necessary for achieving its objective. When workers leave the Netherlands to work in another Member State and transfer their pension entitlements, it is the responsibility of that State to decide whether to authorize lump sum payments. Any loss incurred would then be the financial responsibility of that State. If migrant workers emigrate to a third country after transferring their pension entitlements in a Member State other than the Netherlands, the matter of cross-border transfer becomes a concern for the Member State where the transfer occurred and the third country.

This matter was escalated in 2022 by the European Commission to the European Court of Justice, and ruled against the Netherlands on the 15th of November 2023. Consequently, adjustments to the Dutch pension law are now imperative.

References

Dutch News. (2023, November 17). European court tells NL to change rules on moving pensions. Retrieved from Dutch News: https://www.dutchnews.nl/2023/11/european-court-tells-nl-to-change-rules-on-moving-pensions/

European Court of Justice. (2023). Niet-nakoming – Artikel 258 VWEU – Vrij verkeer van werknemers – Vrij verrichten van diensten – Vrij verkeer van kapitaal – Artikelen 45, 56 en 63 VWEU – Voorwaarden voor de waardeoverdracht van pensioenaanspraken – Aanvullende pensioenopbouw via de werkg. Luxembourg: European Court of Justice.

NL Times . (2023, November 17). EU court condemns the Netherlands for keeping pension nationally. Retrieved from NL Times : https://nltimes.nl/2023/11/17/eu-court-condemns-netherlands-keeping-pension-nationally


Photo:
https://live.staticflickr.com/7337/16216011058_427700756a_b.jpg

 

 

 

 

 

Related Articles

Supreme Court ruling Box 3

Supreme Court ruling Box 3

As the Dutch Supreme court made a ruling on Box 3 on the 6th of June 2024, today’s article will present the changes and their consequences on savings and investments taxes. In the Netherlands, the savings and investments are taxed on box 3 of the yearly income tax...

Chinese cars coming to Europe: a popular debate

Chinese cars coming to Europe: a popular debate

On the note of the recent debates regarding Chinese cars entering the European market with the so-called “green” cars, today’s article focuses on this topic. The automotive sector is the largest industrial sector in Europe, contributing 10% of the value added to the...