Damage to pension after dismissal

When a labour agreement has been terminated, many employees know exactly what consequences this has for their income. What however is not realised by many, is that a dismissal also has consequences for pension entitlements, amongst which the lack of further accumulation of the pension and the expiration of risk based ensured pensions.

The Pension Act

Article 1 of the Pension Act describes pension as retirement pension, disability pension or survivor’s pension, as agreed upon between employee and employer. Practice shows that a pension arrangement always provides for a retirement pension on behalf of the employee, a survivor’s pension on behalf of the partner and/or orphan pension on behalf of the orphans of the employee and a premium waiver when becoming disabled. Potentially it is also possible that a pension scheme provides for a disability pension in the form of a supplement to the Income and Labour Act benefit, e.g. an IVA pension.

Insurance on a risk basis

The disability pension and premium waiver when disabled are insured on a risk basis. This means that the pension can only be awarded when the risk has exposed itself during the labour service. When the labour agreement is being terminated, the participation of the employee in this insurance ends. Also the partner pension can be insured on a risk basis. In such cases the pension only is awarded when the employee deceases when still in service.

Preserving the entitlement on a pension

Article 55 of the Pension Act guarantees that employees are still entitled to a (proportional) determined part of the pension scheme in which they participated. The reason for termination of the participation in the scheme is not relevant for application of this article. Even dismissal with immediate effect cannot quash such rights.

Preserving the partner’s pension

When the pension scheme provides in a partner pension which is insured risk based, art. 55 paragraph 5 of the Pension Act stipulates that the amount of this partner pension must be covered during the period that an employee enjoys a UIA benefit. The height of this pension will be determined by applying this article.

Termination of participation

Termination of participation, e.g. as consequence of the termination of the labour agreement, gives possibilities which are enlisted in articles 54 and 71 of the Pension Act. Article 54 offers the employee the possibility to continue his participation on voluntary basis. Article 71 guarantees the legal right to value transfer. The latter means that the value of the accumulated pension under conditions can be transferred to the pension scheme of the new employer.

Consequences of termination

On the basis of the aforementioned this means that because of the termination of your labour agreement severe consequences for your pension can exist. This is mostly dependant on the manner of your pension accumulation, which can differ in insurance on risk or accumulation basis. In some cases the reason of termination is not important, but in other cases it does. (e.g. when a pension is continued under a UIA benefit, where you of course must be entitled to such a benefit) When you proceed to accept a settlement agreement, or when you have to decide to possibly fight a dismissal with immediate effect, it is wise to consult your pension funds to know to what you are entitled and on what basis.

In appeal…what about damage to your pension?

In this context the new WSA offers possibilities, now that appeal against a termination decision is arranged. Moreover termination by the employer has immediate effect on the basis of art. 7:683 paragraph 1 DCC. With respect to the participation of the employee in the pension scheme this means that participation also will end, meaning that the former participant should be awarded a proportional part, on the grounds of art. 55 Pension Act.

Restoration of the labour agreement

Under the WSA you can claim restoration of the labour agreement in appeal. It is the judge who decides to satisfy this claim and if so, also to look at which moment the labour agreement is ought to be restored. Is this date in the past or in the present? Your claim to a pension can be a good argument in such cases.

Making arrangements

It is also arranged by law that a judge can ‘make arrangements’ in these cases. The judge can then include an arrangement which secures your claim to a pension as much as possible. From this possibility it can be established how important it is that you have decent consultation in such a case, in order to take along all consequences of the dismissal and without forgetting important matters.

When you are involved in a (possible) situation of dismissal and you would need advice, not only within the field of labour but also pension law, please contact Suzanne van Dijsseldonk LLM. All possible consequences of the situation and the possibilities that you have will be discussed in order for you to make a proper conclusion in respect of signing a settlement agreement or not, or even fight a unjust dismissal.