Many employees who want to move to another EU member State want to bring their pensions with them. Even a lump sum should be possible. However, the Dutch State made this practically impossible.
This week the EU Court found that this is a violation of the EU Treaty, the free movement of workers. This will have serious implications for those who want to move their pensions abroad.
It should be recalled that the social protection of workers is one of the imperative requirements in the general interest which may justify a restriction on the exercise of the fundamental freedoms recognised by the EU Treaty.
The need to guarantee lifelong pension benefits as required by the Netherlands – can therefore be invoked to justify a restriction on the free movement of workers.
However, in order to satisfy the requirements of EU law, the national legislation must be suitable for achieving the objective pursued and must not go beyond what is necessary for that purpose.
By imposing certain obligations on the pension institution established in a Member State other than the Netherlands to which a worker who takes up employment in that other Member State wishes to transfer the value of his pension rights, the national legislation at issue cannot, of itself, prevent the risk that the worker will opt to receive his pension in a lump sum and cannot guarantee that the worker will receive his supplementary pension regularly during his retirement.
Beyond what is necessary
Moreover, the legislation in question goes beyond what is necessary to achieve that objective. As soon as workers leave the Netherlands to take up employment in another Member State and transfer the value of their pension rights to that State, it is for that other State to decide whether or not to allow all or part of the pension to be paid to those workers in the form of a lump sum.
If that amount is lost or spent in full, it is for that State to bear the financial burden of that loss, if any. In this case, the value of the pension rights after the transfer would no longer be income from Dutch sources, but income from the new country of residence.
Consequently, the restriction on freedom of movement for workers in question is not justified.
The Dutch Pension legislation is in many respects not EU proof. There are several cases and complaints pending. The above judgements of the EU court strengthen these complaints.
For questions please contact our lawyer and professor EU Pension Law Hans van Meerten.