Time is running out for thousands of small and medium-sized enterprises (SMEs). While large pension funds are already well underway with the transition to the new pension system, many smaller employers and self-employed entrepreneurs have yet to take any action. This could have major consequences, not only for their employees but also for themselves.
A double challenge for entrepreneurs
According to data from Statistics Netherlands (CBS), nearly 30% of Dutch SME owners are over the age of 55, and more than half of them have no concrete plan for business succession or personal pension savings. Many entrepreneurs still rely on selling their business as a retirement provision, a risky strategy. Not every company is easy to sell, especially when no successor is in sight.
The ageing of the entrepreneurial population creates a double challenge: adapting employee pension schemes in time and securing the entrepreneur’s own financial future.
Employee pensions: time is running out
Employers with staff must ensure that their existing pension scheme complies with the Future of Pensions Act (Wet toekomst pensioenen) by 31 December 2027. Those who start too late risk having their insurer terminate the old scheme, which can lead to serious legal and financial consequences.
Jacco Vonhof, chairman of MKB-Nederland, warns that the lack of urgency is worrying: “For many entrepreneurs, pensions are not exactly a hobby. They know it’s important but tend to postpone dealing with it. Yet the urgency is very real.”
The new law stipulates that employers may only offer a Defined Contribution (DC) scheme, in which the premium amount is fixed but the eventual payout depends on investment returns. The traditional Defined Benefit (DB) scheme, where the pension amount is predetermined, will disappear.
Within the new system, employers can choose between a solidary or a flexible DC scheme, depending on how much investment freedom they want to grant their employees.
Six steps for SME employers
Entrepreneurs who still need to update their pension arrangements would be wise to start early. The main steps are:
- Check your obligations. Are you covered by an industry pension fund? Verify this through your collective labour agreement or SBI code.
- Identify employee needs. What do your employees value most in their pension plan?
- Choose the right scheme. Seek advice on the differences between solidary and flexible DC schemes.
- Engage an adviser. An independent pension adviser can prevent costly mistakes and speed up the process.
- Communicate clearly. Employees must give consent for the transition.
- Start on time. Legal deadlines may seem far away, but the process often takes months.
Entrepreneurs without a safety net
At the same time, more than half of all self-employed professionals have no structured pension provision. The state pension (AOW) offers only a basic income; the rest must be arranged privately. Some entrepreneurs opt for a pension insurance policy or a bank annuity, while others rely on private investments or their company’s assets, such as real estate.
However, using one’s business as a pension fund is risky. A company’s sale value is never guaranteed, especially in sectors where successors are scarce or the buyer market is limited.
Pension as a strategic employer tool
A solid pension plan is not just a legal obligation; it’s also a strategic advantage. Research shows that 93% of employees consider a pension scheme important. Companies that actively highlight this benefit position themselves as attractive employers. Moreover, pension contributions are more tax-efficient than salary increases a win-win situation for both sides.
The message is clear
The coming years mark a turning point for Dutch SMEs. Both pension legislation and demographic trends compel entrepreneurs to look ahead. “We share a collective responsibility to ensure things don’t go wrong,” says Vonhof. “The time to act is now.”
Whether it concerns your employees’ pensions or your own retirement provision, a well-structured pension plan is an essential part of responsible entrepreneurship.
