NETHERLANDS - The tax-friendly saving schemes ‘spaarloon' and ‘levensloop' should be merged into a wider and robust savings facility for periods with less income, according to experts.

Changes should be delivered in four stages, to be completed in 2010, professor Lans Bovenberg, director of pensions think tank Netspar, and Peter Conneman, principal at Mercer Human Resource Consulting, proposed.

Bovenberg - one of the architects of the levensloop - and Conneman zeroed in on the coalition agreement, which announced an extension of the relatively new levensloop in response to a disappointing uptake by only 5% of workers.

Levensloop enables workers to finance unpaid interim leave for care or study in a tax-friendly way. Although it also provides for early retirement, it is meant to encourage employees to work longer as they can save up to 12% of their salary a year, up to a maximum of 210%.

Spaarloon allows workers to save up to €613 a year and its purpose is to encourage saving. While the balance can't be withdrawn during the first four years, it is available tax-free after that period.

To eliminate the artificial division caused by the official retirement age of 65, Bovenberg and Conneman propose the spaarloon balance could also to be taken out tax-free beyond 65.

In a further step, the levensloop should be extended into a savings insurance for income loss, not only for employees, but also for self-employed, they suggest. The starting up of a business, the bridging of a gap between jobs and supplementation of a social benefit should become legal spending targets as well.

Following such an extension, the fiscal rules of the levensloop must also incorporated into income tax, which in turn will allow for irregular deposits, depending on the availability of income, Bovenberg and Conneman argue.

In the experts' opinion, banks and insurers would play a pivotal role in carrying out the extended levensloop by retaining tax from the payments.

According to Bovenberg and Conneman, the last step towards a robust savings scheme must be the integration of the levensloop and the annuities regime, including the new of pensions saving with banks.

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