The Dutch Federation of Pension Funds (Pensioenfederatie) has warned that retirees could face unexpected financial consequences from the Netherlands' planned lump-sum pension payment option ahead of a key Senate debate on the legislation.

In a position paper submitted to members of the Dutch Senate ahead of the Senate's plenary consideration of the legislation on 9 June, the federation said that while it supports the reform, participants choosing a lump-sum withdrawal could face “significant and irreversible financial consequences”.

If passed, the legislation would allow pension savers to withdraw up to 10 per cent of their pension entitlement as a one-off payment at retirement.

The federation stressed that it could particularly impact vulnerable participants where income-dependent benefits and allowances are concerned.

It noted that participants could subsequently be confronted with repayment claims and said adequate guidance is therefore of great importance to prevent people from experiencing unintended consequences from their choice.

Despite this, Pensioenfederatie reiterated its support for the lump-sum option, describing it as an agreement reached under the Dutch Pension Accord that offers participants greater choice when they retire.

The federation also expressed support for the government's decision to postpone implementation until 1 January 2029, stating that it shares the minister's view on the importance of a careful implementation of the pension transition, alongside good communication and appropriate guidance for participants considering a lump-sum withdrawal.

In its position paper, the federation said pension funds want to support participants approaching retirement as effectively as possible when making this decision. However, it noted that pension funds encounter limitations linked to their role and the information available to them.

According to the federation, pension funds do not have access to the financial data required to provide participants with a complete picture of the financial consequences of their individual choices.

The federation outlined two measures that it believes could help limit the risks associated with the reform.

First, it called for explicit consideration of the risks linked to the lump-sum option as part of the planned reform of the Dutch tax and benefits system.

Secondly, it advocated a timely evaluation of the legislation. The federation said a review, for example, two years after implementation, could provide insight into whether the guidance pension funds can offer is sufficiently aligned with the intended protection and support of participants.

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