What will change for the relative’s pensions due to the Future Pensions Act (Wtp)?

The loss of an employee is a drastic event. What does the employer's pension scheme offer in such a situation? With the introduction of the Wtp, since 1 July 2023, there will be changes to the relative’s pension. The changes to the relative’s pension are more in line with the needs of today's society. These changes create a simpler relative’s pension that is easier to calculate. Arjan Möller, Pension Specialist at Meijers, explains what relative’s pension means and the impact of the (Wtp).

What is relative's pension?
A relative's pension has a financial care character and consists of partner's pension and orphan's pension. Both pay out after the death of the employee/participant. The partner's pension cushions the partner's loss of income and is paid for life until the partner's death. The orphan's pension is intended to financially support the orphan until at least 18 years of age, or longer if the orphan is studying. Incidentally, this can vary from the one pension scheme to the another.

Definition of partner and child
The pension regulations describe who is eligible for the partner and orphan pension. This is understandable and clear in most situations, as there is always coverage for married and registered partners. For employees who live with a partner or have a composite family, it is wise to find out in advance who is entitled to these benefits. This way, it is clear in advance who is eligible for a partner's and/or orphan's pension. Under the WTP, a uniform partner concept has been introduced. The most important aspect for entitlement to a partner's pension is that there must be a joint household.

Relative's pension before the Wtp
Before the introduction of the Wtp, relative's pension was insured and/or accrued on the basis of a length of service and an accrual rate (salary-service method). This system calculates the benefit on the basis of salary, AOW deductible, years of service until the retirement date and an accrual rate.
Formula:
Years of service x (pensionable salary - AOW deductible) x accrual percentage = gross benefit.
Example: 20 X (€57,545 - / -€17,545 ) X 1.16% = €9,280.

Relative's pension after the Wtp takes effect
With the entry into force of the Wtp, the entitlement to a relative's pension no longer depends on years of service, the accrual rate and the state pension franchise. The calculation for the entitlement is easier. It is a percentage over the salary, with a maximum of 50%.
Formula:
Pensionable salary x percentage = gross benefit
Example: €57,545 -X (for example) 25% = €14,386.

Finally, some points of interest:
- Relative's pension is only insured on a risk basis under the Wtp. So employees are insured only as long as they are employed. When they leave employment, coverage lapses.
- Upon leaving employment, coverage does not immediately lapse. Under the WTP, coverage remains in force for three months as standard. This gives employees more time to arrange new coverage, usually by joining a new employer.
- The orphan's pension may amount to a maximum of 20% of salary and pays out up to 25 years by default (different final ages were possible before the Wtp).
- Relative pensions taken out before the Wtp may remain unchanged until 1 January 2028. By 1 January 2028 at the latest, relative pensions must be adjusted.
- It is important that your employees do not lose out. Make sure you inform your employees properly about the changes.

Want to know more?
Would you like to know more about relative's pensions and the Wtp adjustments to pension schemes? Then contact us. Meijers will be happy to help you!