ABN AMRO MeesPierson: “Many directors of owner-managed businesses don't know what to do with their self-administered pension”

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A large number of directors of owner-managed businesses are unsure what to do with their self-administered pension once the law changes. The new Dutch legislation for phasing out self-administered pension plans will likely come into effect on 1 April. Recently, ABN AMRO MeesPierson held a survey among over 400 owner-managed businesses. Of those who are currently accruing a pension in their private limited company, over a quarter has not yet made a decision. They would be well-advised to take timely action, to avoid unpleasant tax surprises. Indeed, they may even find themselves entitled to tax benefits.

Those directors of owner-managed businesses who have already found a new destination for their accrued pension, chose from a variety of options. The most common ones were commuting the pension (24 percent), converting to a savings option, the so-called Oudedagverplichting (15 percent), transferring to an insurer (14 percent), converting to an annuity (12 percent), or continuing the self-administered pension on a contribution-free basis (10 percent).

Highest discount in 2017

ABN AMRO MeesPierson pension expert Masha Bril warns, “It's important that directors of owner-managed businesses with a self-administered pension stop accruing pension in their private company before 1 July comes around. If they don't stop, the Dutch tax authorities will claim approximately 1.8 times the value of the pension provision on their balance sheet. Furthermore it would be wise to make a decision before 31 December 2017 on what to do with the existing pension. For business owners who want to commute their pension, it's best to do so this year, when the biggest discount from the Dutch tax authorities still applies. Whichever option it will be, directors of owner-managed businesses should make sure their actions are in strict compliance with legal procedures, to avoid financial disputes with the Dutch tax authorities or with spouses, ex-spouses and/or co-shareholders.”

Lukewarm reception

Self-administered pension is quite popular among directors of owner-managed businesses. Half of them have been accruing pension this way, be it partial or in full. One in five of them even stated it's been their main form of pension accrual. The new law for phasing out of self-administered pension plans will make it impossible to continue using this method, probably starting 1 July 2017. The news got a lukewarm reception from many of these business owners; almost half of them believe the phase-out is a bad idea. While one in five supports it, the remaining respondents stated not minding one way or another.

Concerned

A large majority (64 percent) of the surveyed directors of owner-managed businesses expressed concern about their pensions. In particular they're worried about the size of the pension and the question whether in the event of their death their surviving dependents will be able to live a carefree life. “Pension has not been a pressing priority for many of these business owners over the past years,” Bril observes. “The announcement of the new law has put a spotlight on the topic and now they’re wondering: ‘Have I got this properly sorted out?' Getting in-depth information about their specific pension situation can alleviate many of these concerns.”

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