If you have a pension between € 2 and € 503.24 gross per year (2021), this is considered a small pension. This limit is set every year.
What does this mean for employees?
Has an employee built up a pension with previous employers in the past? Then it is possible that he or she has a small pension with one or more pension providers. In the past the employee was usually asked to buy off this small pension. For pensions accrued after 1 January 2018, since 1 January 2019 it is no longer possible to buy them off and these small pensions are automatically transferred to the new pension provider. With this value transfer small pension your employee will not lose the pension.
Automatic value transfer mandatory?
It is not obligatory for a pension administrator to transfer the value to a new pension administrator. Of course the employee can always choose to have the value transferred on his own initiative. If the old pension provider has chosen to transfer the pension value, the new pension provider is obliged to cooperate. The employee cannot object to this.
Consequences for you as an employer
Small increase of risk premium possible
Part of the pension scheme is often the Surviving Dependants Pension. The level of this is partly determined by the (fictitious) years of service. The transfer of pension value increases this fictive period of service, which can result in a small increase of the risk premiums, which are at the expense of you as an employer.
Limited possibility to commute small pensions
The possibility of buying off a small pension is only possible in a limited number of cases, regardless of whether the old pension administrator makes use of the right to value transfer.
Pensions that were created after 1 January 2018 are subject to the following conditions if the administrator wants to commute:
Surrender is only allowed on the retirement date or if automatic transfer has failed;
The executor must have made at least 5 attempts to transfer the value and at least 5 years must have elapsed;
The former member has to agree to this commutation of a small pension.
Very small pensions
Finally, there is the category of very small pensions. The pension administrator does not have to pay out these pensions anymore. If the pension amounts to less than € 2,- gross per year, this pension is cancelled.