What to do with my scattered small pensions?

22 January 2020

What do I do with my scattered small pensions? This question occurs more and more frequently, since people nowadays change jobs more often, and work fewer years for an individual employer. Expats in particular are notable creators of small pension rights scattered across multiple employers.

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What are small pensions then? These are pensions accrued with former employers with benefits at retirement age between € 2.00 and € 497.27 (2019) gross per annum.

Until 1 January 2019, such pensions were often surrendered by pension funds. Depending on (among other things) age and life expectancy, this yielded approximately 17 times the gross accrued annual pension amount for a 50-year-old. Such a surrender offer is often difficult to say no to, not realizing that you still have at least 20 years to go until your retirement date, and that the surviving dependents' pension (partner pension) rights are also bought off at the same time - not to begin mentioning inflation impact.

You also need to consider the resulting income before you agree with such a surrender. If these small pensions are surrendered and paid out, your annual income increases. As a result, your surcharges (toeslagen) can be canceled/ reduced.

But from the beginning of 2019 new Dutch legislation applies whereby old small pensions (from € 2.00 gross per year) are added to your new pension rights at the pension fund of your new employer. Of course, that is subject to conditions, but a phone call to your new pension fund, or googling can quickly make you wiser.

I think this is a very good development in the pension world.

It is more practical to have fewer pensions to keep track of (the communication interval is 5 years instead of 1). Moreover it prevents people from opting out of their retirement money before their retirement date, often at a higher tax rate than from that retirement age.

Enjoying life today is, of course, very important. But knowing that you can enjoy life later on by keeping an eye turned to tomorrow is just as important.