The Average Salary Scheme Explained for Residents of Zoetermeer

The Average Salary Scheme in Zoetermeer

For many residents of Zoetermeer, who often work in sectors such as education, government, or local businesses, the average salary scheme is a common way to build up pension. This scheme calculates pension based on the average salary over the entire career, rather than just the final salary. Unlike the former final salary scheme, it provides more reliable accrual that withstands income fluctuations. Since 2015, it has been the standard for most pension funds, helping Zoetermeerders build a stable pension, particularly in a city focused on sustainable employment.

Legal Basis of the Average Salary Scheme

The average salary scheme is enshrined in the Pension Act (Act of 21 December 2006, Bulletin of Acts and Decrees 2007, 1), effective from 1 January 2007, which replaced the earlier Pension and Savings Act. Articles 1 and following of Book 2 of the Civil Code (CC) and the Pension Act define it as accrual of up to 1.875% per year of service based on the average salary, using pensionable pay.

The mandatory switch to average salary came with the Act on Reduction of Pension Accrual and Maximum Premium (2014), effective from 1 January 2015. This caps accrual at 1.875% of average salary per year, aligned with the fiscal scale. The Tax Authorities oversee fiscal rules under the Income Tax Act 2001 (articles 11 and 19), making the scheme tax-efficient but with limits to prevent excessive benefits. Zoetermeer residents seeking advice on local application can contact Het Juridisch Loket Zoetermeer for free guidance.

How the Average Salary Scheme Works in Practice

Under an average salary scheme, employer and employee contribute premiums to a pension fund or insurer. The average salary is the weighted average earnings during participation, adjusted for salary changes. For example, if a Zoetermeer employee starts at €30,000 and ends at €50,000, the average salary might be €40,000 as the basis for calculation.

Accrual proceeds as follows:

1. Premium contributions: Employer and employee pay premiums, often split equally, depending on the collective agreement in sectors like local government.
2. Accrual rate: Each year, 1.875% of the average salary converts to pension rights.
3. Indexation: Pension may increase via indexation, based on fund performance.
4. Payout: Upon retirement, a monthly amount follows, typically 70% of average salary after 40 years of accrual.

For variable income, such as bonuses at Zoetermeer companies, usually only fixed salary counts, unless the collective agreement states otherwise. This ensures predictability but is less favorable for those who rise rapidly late in their career.

Differences with Other Pension Schemes

The average salary scheme differs from the final salary scheme, which dominated until 2015. Here's an overview:

There is also the defined contribution scheme, with fixed premiums and variable outcomes from investments. Average salary offers more certainty, suiting Zoetermeer's stable jobs.

Rights and Obligations under the Average Salary Scheme

Zoetermeer employees are entitled to clear pension information, such as annual statements (mandatory under article 40 Pension Act). Upon job change, accrued pension can transfer via value transfer (mandatory since 2019 for larger funds). For disputes on pension rights, residents can approach the Rechtbank Zoetermeer.

Obligations include notifying the employer of salary changes, who passes this to the fund; failure reduces accrual. Employers must pay premiums and ensure execution, or face fines from De Nederlandsche Bank (DNB). In divorce or death, uniform accrual applies (Pension Act, article 15), with equal sharing between partners. Het Juridisch Loket Zoetermeer assists with family-related pension matters.

Practical Examples of the Average Salary Scheme

Suppose Anna, a teacher at a Zoetermeer school, works 30 years. She starts at €2,500 gross per month and ends at €4,000. Her average salary is about €3,250. With 1.875% annual accrual, after 30 years she gets roughly 52.5% of €3,250, or €1,706 monthly old-age pension (excluding state pension).

Or Bas, a manager at Gemeente Zoetermeer, who peaks early and stabilizes at €5,000 average salary. After 40 years, he accrues €3,500 pension. Under final salary, it would be higher due to his peak, but average salary protects against later drops.

In local sectors like education and municipality (e.g., ABP fund), average salary results in collective agreements on transition compensation, with extra support via Gemeente Zoetermeer for regional workers.