In the old days, the next of kin and the children got off poorly if the breadwinner – usually the father – died prematurely. In fact, this was not so long ago and even in our modern times it still happens regularly that the survivor is deprived of income provision in the event of the partner’s death before the retirement date or pre-death of the partner.
The survivor’s pension has evolved considerably over time. While there used to be only a widow’s and orphan’s pension and then a widow’s, widowers’ and orphan’s pension, nowadays there is talk of a survivor’s pension. The current term survivor’s pension encompasses a partner’s and an orphan’s pension.
When are you now a partner in the sense of a partner’s pension and to which part are you entitled? This question can be answered by the Pensions Act. The law defines a partner as a spouse, registered partner or partner within the meaning of the pension agreement. Under the same law, a partner’s pension is a monetary benefit, fixed or variable, for the spouse, registered partner or partner, former spouse, former registered partner or former partner due to the death of the employee or former employee.
What does that mean “partner within the meaning of the pension agreement”? This can be the man or woman with whom the employee lives, not being a relative by blood or marriage. Depending on the choice made by the employer, the description is broader or more limited.
In addition to the fact that the definition of “partner” can be filled in differently, the partner’s pension to be awarded by the employer can also be substantively shaped. Like any form of pension, the bandwidth of the partner’s pension is determined by tax laws and regulations. In general, the tax limit on the amount or financing of the partner’s pension is not complicated. The partner’s pension is a derivative of the retirement pension, both before and after the retirement date.
Method of insurance
The partner’s pension can be insured in various ways. On the basis of one-year risk, for example, or on the basis of a constant premium (although this is not so common anymore). The basis of a partner’s pension can be a salary or years of service standard, whereby a distinction can also be made between a final salary or an average salary standard. The basis may also be different, because an AOW deductible and pension basis are used that deviates from the old-age pension. In short, a lot is possible with regard to the accrual and insurance of the partner’s pension. Such pensions are often insured on a risk basis, which means that they lapse upon dismissal. Due to the many possibilities in combination with tax laws and regulations and the way in which a partner’s pension may be filled in by the Pensions Act, a partner’s pension is often no longer the derivative product it intended to be. In other words, it has become too complicated.
In the new pension agreement, this fragmentation is halted, as well as the chance of ending up empty-handed in the event of death. Without going into details about the agreements in this agreement, the legislator actually wants to introduce a new system as soon as possible:
- the partner’s pension in the event of death before the retirement date is only insured on a risk basis;
- the partner’s pension is based on the (full) salary;
- the partner’s pension is independent of years of service, so that the level of the partner’s pension no longer depends on the employment history or the years of service to be spent with the employer;
- the maximum fiscal scope is 50 percent of the (full) salary;
- after termination of employment, the coverage of the partner’s pension continues;
- in the event of unemployment, the coverage of the partner’s pension continues for as long as the unemployment benefit period lasts;
- in the case of the long-term unemployed, part of the retirement pension may be exchanged for cover for survivors;
- a partner’s pension may not end on reaching retirement or state pension age, but should in principle be lifelong.
This new form of partner’s pension has almost immediate effect. Employers can already agree on this new partner’s pension. But beware: a change to the partner’s pension is a change to the pension agreement and therefore to the pension scheme.
Author: Mr. A.P.J.G.M. (Ton) Roebroek CPL
This article appeared in F&A Actueel 2020, episode 9.