Transition payment shortly before Dutch state pension age

Are you being dismissed shortly before reaching Dutch state pension age (AOW)? You may still be entitled to the full statutory transition payment.

Do you receive the full transition payment shortly before state pension age?

In brief: yes. If employment ends before state pension age at the employer’s initiative and the statutory conditions are satisfied, the transition payment is not automatically reduced merely because retirement is near.

The payment is calculated under the ordinary statutory formula. The difference between the dismissal date and the state pension date is not therefore a simple cap on the payment.

If employment ends because the employee reaches, or after the employee has reached, state pension age or another agreed retirement age, a statutory exception applies. The precise termination date and dismissal route are therefore decisive.

Not limited to the remaining loss of income

The Dutch Supreme Court confirmed that proximity to state pension age does not in itself justify limiting a statutory transition payment to the salary loss up to retirement.

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Assessing a transition payment shortly before state pension age

Check before signing:

the official state pension date
the proposed termination date
who initiated the dismissal
whether the statutory transition payment has been calculated correctly
whether salary, unused holiday and pension have been addressed separately
whether the settlement agreement includes an unnecessary waiver of rights

Do not accept “only a few months until state pension age” as a discount

First establish the statutory entitlement and only then assess the overall proposal.

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What did the Dutch Supreme Court decide?

The full statutory payment may be due

In its judgment of 5 October 2018, the Dutch Supreme Court held that the mere fact that an employee would reach state pension age shortly afterwards was insufficient to reduce the transition payment. The judgment is published as ECLI:NL:HR:2018:1845.

Not simply damages for financial loss

The transition payment is calculated under a statutory formula and serves several purposes. It is therefore not automatically capped at the expected loss of income until the state pension date.

The termination date remains decisive

The judgment concerned termination before state pension age. If employment ends in connection with, or after, reaching that age, the statutory state-pension exception may apply.

What does this mean for your settlement agreement?

Check whether the payment offered at least reflects your statutory position. Also negotiate separately about release from work duties, the final settlement, legal costs, pension and the lapse of restrictive covenants.

A settlement agreement often states one total amount. Ensure that it specifies which part is the transition payment and when it will be paid.

View the general rules on state pension age