The ‘levensloopregeling’ (life-course savings scheme) was officially abolished in 2012, but transitional arrangements made it possible for employees who had saved up enough money to continue using the scheme. Next year, however, the scheme will definitively be closed to everyone. What exactly does this mean?
Only those employee who had a balance of € 3000 or more on their life-course savings account on December 31, 2011 are still permitted to continue saving money through the scheme. If such an employee asks you for a life-course savings scheme, you must provide him/her with one. Any agreements pertaining to the scheme must be documented in writing, including at least the following details:
- the savings institution where the employee is saving money through the life-course savings scheme;
- a written statement by the employee in which is mentioned whether or not any money saved through a life-course savings scheme with a previous employer must be taken into consideration (more information on this later).
Those employees eligible to continue saving money through the life-course savings scheme are permitted to save up 12% of their annual salary. The money saved must be subtracted from the employee’s gross wages, as they qualify as deductible expenses.
The 12% which may be saved up can be calculated based on the employee’s wages in money, increased by the value of any wages in kind and taxable tips and benefits from funds (the total of column 3, 4 and 5 on the payroll) or the taxable wages (column 14 on the payroll), plus any withheld employee contributions (such as pension premiums).
If the balance on an employee’s life-course savings account is 210% or more the annual salary received the previous year, the employee may not make use of the life-course savings scheme this year. The balance on the account may continue to increase as a result of financial return.
Make sure to check whether or not employees have saved up any money or accumulated paid leave (‘verlofsparen’ in Dutch) with previous employers: this must be included when assessing the balance of an employee exceeds 210%. This is why the employee must provide a written statement in which is mentioned whether or not any money saved through a life-course savings scheme with a previous employer must be taken into consideration.
Any employer’s contributions to an employee’s life-course savings qualify as non-taxable wages if the following conditions are met:
- The contribution is given to all employees in a similar situation, even if they do not make use of a life-course savings scheme;
- You will not set any conditions for the moment on which employees can take out their life-course savings.
For those employees who do not make use of a life-course savings scheme, employer’s contributions must be added to the taxable wages of these employees.
Employees eligible for the continued use of the life-course savings scheme have a right to this scheme; however, they do not have a right to take out the life-course savings. Instead, they need permission to do so, unless the savings will be used to finance leave to which they legally entitled, such as paternity leave. If the employee takes out any life-course savings, the amount must be added to the employee’s taxable wages from current employment. If at the start of the calendar year the employee is 61 years of age or older, the amount of savings taken out must be added to the employee’s taxable wages from previous employment. You do not have to pay any employee insurance premiums over these wages.
When taking out life-course savings, the employee is entitled to a life-course savings scheme tax credit when a payroll tax credit is applied to the employee’s wages. The life-course savings scheme tax credit is equal in amount to the amount of savings taken out, but in 2020 at most € 219 per year the tax credit was not applied. A right to this tax credit could be acquired up to and including 2011.
At the end of 2021, when the life-course savings scheme will definitively be closed to everyone, all accrued life-course savings can be taken out at once – a moment of joy for those who have saved up – which means that the combined economic value of these savings must be taxed. This will mark the definitive end of the life-course savings scheme.
On September 15, an adjustment to the aforementioned ‘moment of joy’ was proposed in the legislative proposal ‘Overige Fiscale Maatregelen’. Because of practical objections, the moment on which all life-course savings can be taken out has been brought forward from December 31, 2021, to November 1, 2021. In addition, savings institutions will act as withholding agents for the taxation of life-course savings. This means that after October 31, 2021, the life-course savings scheme is no longer an employer’s business.