Settlement Agreement in an Employment Dispute: What Happens to Your Pension Accrual?

VSO and pension accrual in an employment dispute

When a VSO follows an employment dispute, your pension accrual is an important point of attention. Below you can read how to protect your pension as effectively as possible.

A settlement agreement in an employment dispute usually focuses on matters such as the severance payment, the end date, and unemployment benefit (WW). What often receives insufficient attention is the impact on your pension accrual. Yet this can have considerable 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 simply continues. The moment you leave employment — including where the employment ends by means of a settlement agreement — that active accrual stops.

The pension you have already accrued fortunately remains yours. That entitlement does not lapse. However, you will no longer accrue any new pension with that employer from your departure date onwards.

What changes in practice when a settlement agreement is signed?

When you sign a settlement agreement in an employment dispute, the employment contract ends on an agreed date. From that date, you are no longer regarded as a participant in your employer's pension fund. This has a number of direct consequences:

• Actieve opbouw stopt: you no longer accrue any new pension in this fund.
• Premieafdracht eindigt: both the employer's contribution and the employee's contribution fall away.
• Slapersstatus: your accrued entitlements remain in place, but they no longer increase in line with your salary or career progression.
• Overgangsperiode: in some sectors a brief premium-free continuation applies, but this is an exception.

Whether, and for how long, any pension cover continues after the end of employment varies from one pension scheme to another. It is therefore advisable to read your own pension scheme carefully or to 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 contract. The earlier that date falls, the sooner your pension accrual stops. That may seem obvious, but in practice this point receives too little attention during negotiations.

Suppose your employer wants the VSO 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 can already amount to hundreds of euros in pension accrual — and that adds up over the years.

At a Settlement agreement in a dispute: your rights and approach it is therefore important not to look solely at the transition payment, but also at the end date and the consequences this has for your pension.

Practical points to consider regarding pension and settlement agreements

Do you want to avoid unnecessarily missing out on pension accrual? If so, bear the following in mind:

• Check what the statutory notice period is and ensure that the end date in the settlement agreement corresponds to it.
• Ask your pension fund for an overview 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.
• Ask your new employer whether you will join a pension scheme immediately and whether a waiting period applies.
• Enquire 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 the possibility for former employees to continue paying pension contributions themselves on a temporary basis. This is known as voluntary continuation. In practice this is relatively expensive — as you will also be paying the employer's share yourself — but in certain situations it may be worth considering.

This is certainly worth considering if you expect to have a period between jobs. Make enquiries in good time, as there is generally a registration deadline after leaving employment beyond 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 negotiate for the employer to continue paying pension contributions for a certain period, or for the transition payment to be higher as compensation for the pension missed.

Whether this is achievable depends on the circumstances, the room for negotiation, and the nature of the dispute. It is worth giving this careful thought before you sign — not afterwards.

Why Employment Lawyer Eindhoven

At Arbeidsjurist Eindhoven, we understand that an employment dispute is already stressful enough. Pension is the last thing on your mind, yet the consequences can be significant. 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 based 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? Feel free to get in touch with us. We are happy to think things through with you, so that you can make a well-informed decision.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.