With this premium scheme, the director-major shareholder builds up a solid pension capital with an available premium scheme with lifecycle accumulation. The pension premium includes no other costs; the full premium (100%) is used for your pension. Spouses and children are also insured. Additionally, it ensures that if you are unable to work due to disability, pension accumulation continues without premium payment.
Pensionable wage director-major shareholder pension premium
12 times fixed monthly salary (+ possibly 8% holiday allowance).
13 times fixed monthly salary (+ possibly 8% holiday allowance over 12 months).
There is also an annual maximum pensionable wage.
Pension base = Pensionable wage -/- AOW franchise.
AOW franchise director-major shareholder pension
The franchise factor for an available premium scheme is 100/75 of the AOW benefit plus holiday allowance applicable to married persons with a partner older than the AOW age (in the table: AOW 50%).
Maximum premium investment.
Budget-wise, a director-major shareholder pension premium is easy to calculate. The premium amount is expressed as a % of the pension base. 30% is the maximum tax-acceptable premium. Less is, of course, always allowed.
Example calculation of director-major shareholder pension premium.
- Salary € 51,000,- full-time (director-major shareholder salary)
- AOW franchise € 16,000,-
- Pension base € 35,000,-
- Part-time percentage 80%
- Pension base € 28,000,-
- Assumed flat pension investment 12% per year
- Annual pension investment is € 3,360,-
- Per month € 280,-
Important:
- The salary to build pension on is capped at approximately € 130,000,-.
- The flat premium percentage is capped at 30%.
No premium obligation
A director-major shareholder pension premium insurance is a unilateral contract. You enter into the contract with the “passive” pension insurer. Therefore, a director always has the possibility, within the fiscal legislation frameworks, to change or stop premium payment. However, for tax reasons, the accumulated pension capital must actually be used for purchasing a pension payout. Even if you stop premium payments earlier.
Survivor’s pension choice of inclusion
In a DGA pension premium insurance, the survivor’s pension can be included. After the death of the director-major shareholder, the private partner will receive a pension payout, often lifelong. Often, this payout is not fitting or too high, too low, or too long. Therefore, a tailor-made life insurance is often chosen that can be further customized for the surviving partner.
Survivor’s Pension or Partner’s Pension
Instead of a partner’s pension, we prefer to talk about the survivor’s pension; this includes children who are insured with an orphan’s pension under a director-major shareholder pension premium scheme.
Two variations when insuring only the partner’s pension.
- The director-major shareholder dies before the pension date.
- The partner receives an income from the pension insurance. This survivor’s pension is usually lifelong. The payouts are taxed as income. They can also be insured to increase, for example, through a 3% indexation. The private company will pay the premium for this.
- The director-major shareholder shareholder dies after the retirement age.
- The choice of how the partner then receives a payout does not have to be made until around the retirement age. This situation arises only after the director-major shareholder pension premium accumulation scheme is converted into an expiring payout.
Calculation of partner’s pension
Partner’s pension before the pension date is a percentage of the salary. The risk premium for partner’s pension is added to the available director-major shareholder pension premium. Usually, an orphan’s pension is also insured.
The government ensures with the survivor’s benefit from the General Survivors Act (Anw) that survivors have a basic income. The Social Insurance Bank (SVB) pays out this benefit.
There is often an option to insure that amount until the pension end age
Calculating orphan’s pension
Orphan’s pension is also a certain percentage of the salary.
General Widowed Act (Anw)
The General Survivors Act (Anw) provides widowed with a basic benefit under certain conditions. Every resident of the Netherlands is automatically insured for the Anw. If you are widowed with children up to 18 years of age, you are eligible for a widowed’s benefit. Or if you are disabled and you have lost your partner. Further conditions apply, however.
Ages at a glance
- Starting age. The starting age is the age from which the director-major shareholder starts insuring his pension scheme. The minimum starting age is 18 years. And at that age, the DGA pension premium payment begins.
- Scale age. For determining the height of the maximum premium, the age as listed in the premium scales applies.
- AOW age. Determined by the government. The age cannot be changed by a director-major shareholder. There is no obligation to stop working either. The tax rates after the AOW age are lower because no more national insurance contributions are due.
- Pension age. The actual date the director-major shareholder starts their pension payouts.
- Pension target age. The age with which the scheme has actuarially calculated when the director-major shareholder will retire. Possible pension target ages are: the age of 60, 61, 62, 63, 64, 65, 66, 67, and 68 of the DGA.
Director-major shareholder pension premium personal contribution
It may be attractive not to have the premium fully paid by the private company but to include a personal contribution in the pension scheme. After all, this personal contribution reduces the salary on which income tax is paid. And that income tax is often the top income tax rate. The director-major shareholder’s personal contribution may not exceed 50% of the total pension costs. With such a compensation, an employer (the private company) thus reduces its pension costs.
Bankruptcy and director-major shareholder pension
Many director-major shareholder’s have a private company from which he declares a fee to “his” work private company. That work private company can run into financial problems after which the private company uses the funds in his own private company to financially support the work private company. In the event of bankruptcy, then an empty work private company and an empty holding private company remain. The private company is lucky if the bankruptcy and private company pension do not also drag his house into the ordeal.
Bankruptcy has no effect on director-major shareholder pension insurance
When a curator is present in bankruptcy, he would like to cash in on the pension insurance. The money is then used to satisfy the creditors. Luckily, the director-major shareholder’s pension claim does not fall under the Pension Act. But unfortunately, the curator then encounters a prohibition on buyout with a director-major shareholder’s pension premium insurance. According to the Supreme Court ruling, it’s about ensuring that the accumulation of an old-age provision stays within the fiscal frameworks. If that is the case, the curator may not cash in the pension insurance.
There is only a risk that a curator involves a director-major shareholder with his personal assets in a bankruptcy if he/she can prove that there has been improper management and can demonstrate that this caused the bankruptcy.
Rights of director-major shareholder partner’s pension in bankruptcy
It should also be considered that the spouse usually has rights to (a portion of) the director-major shareholder pensions. Most curators will not want to take this fight if there is an insured director-major shareholder pension. A bankruptcy and director-major shareholder pension at an insurer are difficult to reconcile. See also the ruling of the Supreme Court.
In a director-major shareholder pension premium insurance, the survivor’s pension can be included. After the death of the DGA, the private partner will receive a pension payout, often lifelong. Often, this payout is not fitting or too high, too low, or too long. Therefore, a tailor-made life insurance is often chosen that can be further customized for the surviving partner and children.
Director-major shareholder pension premium in own management
Building up a pension in one’s own management by a director-major shareholder is no longer allowed.
director-major shareholder’s, with respect to claims they have built up in their own management until 1 July 2017, had several years to choose to either buy these off or convert them into an old-age obligation (ODV) at the private commpany. In both cases, director-major shareholder’s were allowed to base this on the fiscal value. The difference between the commercial and fiscal value could be written off without fiscal taxation and added to the private company’s equity.
If the director-major shareholder does not use the opportunity to buy off or convert the Own management pension, then the old calculation legislation before 01-01-2017 continues to apply to it.