Due to the increase of the retirement age, there is an increasing need for flexibility in the (earlier) use of the pension. Research shows that older workers feel caught off guard by the accelerated increase in the state pension age and find it difficult to reach this state pension age in good health and while working. This prompted a (temporary) adjustment of the Early Retirement Scheme (RVU) created in 2005.
How was it again? The purpose of the RVU scheme was to prevent employers from (structurally) offering older employees the (financial) opportunity to retire earlier. If the employer provided an employee with one or more (periodic) benefits prior to retirement - with the intention of bridging the period until retirement - a final levy of 52% was levied on the employer. This sought to combat the use of an RVU scheme.
On 12 January 2021, the Senate passed the "Lump sum, RVU and leave savings" Act. This law means that as of 1 January 2021, the RVU scheme will be temporarily relaxed by offering an exemption on severance schemes up to a certain amount. In addition, the law offers more tax leeway on leave savings, making early retirement possible earlier. This article further explains the temporary relaxation of the RVU scheme and the expansion of leave savings.
The Ministry of Social Affairs and Employment, together with the STAR (Labour Foundation), recently published a 'guide' on the RVU scheme. This document discusses the new regulations in detail and provides practical guidance and background on the scheme.
The relaxation of the RVU scheme means that employers are exempted from a 52% RVU levy up to a certain amount (RVU threshold exemption). This relaxation applies for a period of five years (up to and including 2025) and then has a phasing-out period of three years. The run-out period means that an RVU scheme agreed no later than 31 December 2025 can still be paid out in 2026, 2027 and 2028.
The purpose of the RVU threshold exemption is to offer employers room to let older employees, who are no longer sustainably able to continue working until the AOW age, stop working a maximum of 3 years before the AOW age. This will make it more attractive for employers to let employees retire earlier.
To fall under the RVU threshold exemption, the following conditions must be met:
This exemption can be used a maximum of once per employee.
The threshold amount of EUR 1,767 per month is adjusted annually. The amount of this exemption is linked annually to the grossed-up amount of the net state pension (AOW) for single persons, as applicable on 1 January of the year in which the payment is made. As an employer, please note that the threshold amount may vary from year to year.
To calculate the total exemption amount for all payments, multiply the threshold amount of EUR 1,767 per month by the number of months between the first payment and reaching the state pension age. The number of months is then rounded up to the nearest whole month. An example is given below:
Hans will reach state pension age on 18 June 2024. On 1 July 2021, he will receive a one-off severance payment (RVU payment) from his employer. The period between receiving the severance payment and reaching state pension age is 35 months and 17 days.
This period may be rounded up to the nearest whole month. As a result, 36 months qualify for the threshold exemption. The total exemption amounts to: EUR 63,612 (36 * EUR 1,767). If the total severance payment falls within this amount, the employer does not have to pay the 52% RVU levy.
If a higher amount is paid than the exemption, an RVU levy of 52% will still be charged on the part of the payment exceeding the exemption. Also in case the benefit is paid earlier than 36 months before the state pension age, the RVU levy will be calculated on the exceeding months. Below is an example:
Anna will reach state pension age on 1 January 2024. On 1 January 2022, she will receive a one-off RVU payment from her employer amounting to €57,600.
The period between receiving the RVU payment and reaching state pension age is 24 months. The total exemption amounts to: €42,408 (€1,767 multiplied by 24 months). The employer is liable for RVU tax on an amount of €15,192 (the RVU payment of €57,600 minus the threshold exemption of €42,408).
In addition to the (partial) exemption from the RVU levy, the law also contains an option to expand the tax space for non-statutory leave. Employees can currently take up to 50 weeks of tax-facilitated holiday leave and compensatory leave. Now, the option is offered to increase this tax limit for employees to 100 weeks. Employees can take the accrued leave at different times during their career. This then provides an opportunity to work less or stop working (with salary) in the years before the state pension age.
The conditions for the RVU threshold exemption are relatively simple on the face of it, but can create complex situations in practice. It is understandable that the changes regarding the RVU scheme and leave savings lead to questions. We would therefore be happy to help you with these.