The Netherlands must amend its pensions law after a ruling by the Court of Justice of the European Union in Luxembourg.
The court condemned the country for preventing citizens from moving to another EU Member State and keeping their national pension funds.
According to the court ruling, the Netherlands has been in violation of European agreements on the free movement of labour and capital, as well as those on moving pensions to other EU nations.
Until now, if an EU resident wanted to transfer their pension capital to a pension institution in another country in the bloc, the choices regarding withdrawing this money early (a “buy-out/commutation”) were limited by Netherlands law.
That meant the options available to withdraw funds early could not be more extensive than those provided in the Netherlands.
In the Dutch context, accessing pension funds prematurely is generally restricted to specific circumstances, notably when an individual has accrued a “modest” pension sum.
In instances where the rules for early withdrawal are more relaxed in another EU country, Dutch individuals relocating their pension to that jurisdiction are often subject to taxation under comparatively stringent regulations in the Netherlands.
These limitations make it hard for citizens to take their accumulated pension funds with them when they move to other Member States.
According to the European court, this puts those who have accrued pensions in the Netherlands at a disadvantage in comparison to other EU nationals.
Citizens who have accumulated pensions in the Netherlands are thus less likely to consider living and working elsewhere in the bloc.
Foreign employers also face challenges. Employees with Dutch pensions who transfer to another Dutch firm can move their pensions to a different pension fund but foreign employers are not able to provide such an option.
The case was brought to court by the European Commission. It has had concerns regarding Dutch pension rules since 2012 and, after failing to secure a satisfactory arrangement, EC officials pressed charges last year.