Five pieces of financial advice for employees nearing retirement
Henk has been with the organisation for twenty years now. Five more years and he’ll retire. A new phase in life begins. Henk is very much looking forward to it. But it’s also exciting. What about his pension? What does he have to arrange? How much will he have to spend? Maybe he should start living more frugally?
Henk has a lot of questions. What does he need? Honest information about retirement. And that’s exactly what you need as an HRM employee. Talk about this in person. And are there several people in the organization who will eventually retire? Then organise an information meeting. And invite the pension fund or the pension insurer, for example. That is part of being a good employer and is greatly appreciated. Five topics to discuss with your employee:
1. Insight into your pension
First and foremost, it is important that the employee understands the amount of his pension:
The employee can check what has been accrued with his own pension fund. In any case, the employee must apply to the pension fund for the accrued pension. It is advisable for the employee to ask the pension fund how long in advance this must be done. The pension fund then calculates how much money will be paid. Has the employee accrued pension with several funds? Then he or she must apply to each of these funds. Handy to know: in the course of 2019 the scheme for buying off small pensions will be replaced by a scheme of value transfer. This means that all of someone’s pensions are merged into one retirement provision.
Download the publication “Pension law in focus” of the Dutch government
On mijnpensioenoverzicht.nl ( logging in with DigiD) the employee can see a complete overview of all his or her pensions. Please note: the overview is based on working until the state pension commences. This calculation also assumes that there has been no partner separation. Moreover, the amounts are not always up to date. At pensioenkijker.nl you will find frequently asked questions about pensions.
Has there been a partner separation? If so, point the employee to the separation agreement. What does this covenant say about retirement? Have agreements been made about that? Or is the ex-partner still entitled to 50% of the pension?
2. Apply for AOW
It is advisable for the employee to apply for the AOW payment from the Sociale Verzekeringsbank (SVB) approximately 3 to 6 months before the retirement date. If you fail to do so in time, the SVB will pay the benefit retrospectively for up to one year.
Everyone who has lived and/or worked in the Netherlands is entitled to AOW benefit (General Old Age Pensions Act). The amount of this benefit depends on the number of years someone has lived in the Netherlands. All kinds of rules apply to people who have not lived in the Netherlands for some time.
Read more about the AOW on rijksoverheid.nl
3. Tax tips
Once the employee retires, he or she continues to pay payroll taxes. Namely: about the AOW and the pension. It is wise to have the payroll tax deducted from the highest income. Usually it is the AOW, but sometimes it is the pension payment. This avoids having to pay additional tax. Does the employee have multiple retirement benefits? In that case, you should apply for a provisional income tax assessment.
Is there also a so-called third pillar pension (annuity insurance, annuity account or bank savings account)? Even then the tax authorities are around the corner.
4. Other tax rates
Different tax rates apply to people who have reached the state pension age. Over the first two tax brackets they pay about half as much tax as people who work. Those who retire early do pay the high tax rates.
More about this on the website of the tax authorities
5. Giving wealth to (grand)children or others
You might not think of it that quickly, but donating assets during your lifetime can be interesting. So it’s good to point this out to the employee. That is, if he can spare a little power. Annually he or she can donate tax-free about 5,000 euros to the children and about 2,000 euros to the grandchildren or others. Increased exemptions apply to specific situations. Such as a study or your own home.
The soft sides of retirement
Important, of course, to talk about the financial side of retirement. However, the ‘soft’ sides are at least as important. What changes in a person’s life? As a retiree, how do you plan your retirement? It’s good to start talking about that too. Our experience is that this yields a lot. As an HRM employee, do you attach a lot of value to this? Essenburgh Training & Advice also offers opportunities for this:
Training Sustainable Employability
It is, of course, important that older employees continue to enjoy their work. That they remain inspired and feel that their work matters. Do you notice that the resilience of older employees is under pressure? During the Sustainable Employability training course, intended for employees aged around 50 and older, they jointly (re)discover their vitality.
Training Retirement in sight
Many organisations grant their older employees the training Pension in sight. They have the space to reflect and look ahead. How do they look back on their working lives? What will they do once they retire? What will be the new rhythm of living? In short, the program provides people with the insights they need to make sense of their new lives. Both large national organizations and smaller companies choose this option. Why? Because in this way they show that they have an eye for and value their employees.
Do you want to properly support older employees in their final years of employment? Then take a look at our Pension in sight training courses. They offer depth and practical tools. If desired, we can create a tailor-made training course. Would you like to know more about sustainable employability and what you as an HRM can do for your employees? Download our e-Book for all the ins and outs!
Are there older employees in your organization who will be retiring soon? Or are you curious what else Essenburgh can do for you? Then take a look at our retirement in sight training.