A settlement agreement in an employment dispute typically focuses on matters such as the severance payment, the end date, and unemployment benefits. What often receives too little attention is the impact on your pension accrual. Yet this can have significant financial consequences that you may not feel until years later.
How does pension accrual through your employer work?
For most employees in the Netherlands, pension is accrued through the employer, via an industry-wide pension fund or a company pension fund. As long as you are employed and receiving a salary, that accrual continues as normal. The moment you leave employment — including when a settlement agreement brings it to an end — that active accrual stops.
Fortunately, the pension you have already accrued remains yours. That entitlement does not lapse. However, you will no longer accrue any new pension with that employer from the date of departure.
What specifically changes with a settlement agreement?
When you sign a settlement agreement in an employment dispute, the employment relationship ends on an agreed date. From that date, you are no longer considered a participant in your employer’s pension fund. This has a number of immediate consequences:
- Active accrual stops: you no longer build up any new pension with this fund.
- Premium contributions cease: both the employer’s contribution and the employee’s contribution fall away.
- Dormant status: your accrued entitlements remain in place, but they no longer grow in line with your salary or career progression.
- Transitional period: in some sectors a short premium-free continuation applies, but this is the exception rather than the rule.
Whether and for how long any pension cover continues after leaving employment varies depending on the pension scheme. It is therefore advisable to read your own pension scheme carefully or have it checked.
The end date in the settlement agreement: why it is crucial
A settlement agreement sets out an official end date for the employment relationship. The earlier that date, the sooner your pension accrual stops. This sounds straightforward, but in practice it receives too little consideration during negotiations.
Suppose your employer wants the settlement agreement to take effect from the first of the following month, whereas the legally correct notice period would be two months. That one month’s difference could already amount to hundreds of pounds’ worth of pension accrual — and that adds up over the years.
When dealing with a settlement agreement in a dispute: your rights and approach, it is therefore important not only to look at the transition payment, but also at the end date and its consequences for your pension.
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Plan a conversationPractical points to consider regarding pension and a settlement agreement
Want to avoid missing out on pension accrual unnecessarily? Bear the following in mind:
- Check what the legal notice period is and ensure that the end date in the settlement agreement corresponds with it.
- Ask your pension fund for a statement of your current accrued entitlements before you sign.
- Check whether your pension fund offers voluntary continuation after leaving employment and for how long.
- Consider whether a higher transition payment could compensate for any pension loss — this is a negotiating point.
- Find out from your new employer whether you will be enrolled in a pension scheme straight away and whether a waiting period applies.
- Ask about the possible transfer of your pension to a new fund if you have a new job.
Voluntary continuation: an option few people know about
Some pension funds offer former employees the option to continue paying pension premiums themselves on a temporary basis. This is known as voluntary continuation. In practice it is relatively expensive — as you then also pay the employer’s share yourself — but in certain situations it can be worthwhile.
This is certainly worth considering if you expect to have a period between jobs. Make enquiries promptly, as there is usually a registration deadline after leaving employment, after which this option lapses.
Pension as a negotiating point in a settlement agreement
Many people do not realise that pension accrual can also be a negotiating point when discussing a settlement agreement. In some cases it is possible to arrange for the employer to continue paying pension contributions for a set period, or for the transition payment to be higher as compensation for the lost pension.
Whether this is achievable depends on the circumstances, the room for negotiation, and the nature of the dispute. It is worth considering this before you sign — not afterwards.
Why Labour Lawyer Eindhoven
At Arbeidsjurist Eindhoven, we understand that an employment dispute is stressful enough as it is. Pension is often the last thing on your mind, yet the consequences can be far-reaching. We look not only at the immediate terms of a settlement agreement, but also at the long-term effects — such as the impact on your pension accrual.
Are you in Eindhoven or the Brabant region and caught up in an employment dispute? Would you like to know what a settlement agreement means for your pension? Contact us without obligation. We are happy to think things through with you, so that you can make a well-informed decision.
We're happy to help you brainstorm ideas. For advice tailored to your specific situation, we'd be happy to sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
