NETHERLANDS - The Dutch pensions sector has criticised the leaked cabinet plan to limit the tax-deductibility of pension contributions for higher incomes.

The plan - to be officially revealed on September 18 as part of the yearly budget - will cause substantial extra administrative costs, and could undermine the Dutch pension system as a whole, the umbrella organisations of pensions funds and insurers claim.

"The proposed cap of tax-deductibility means a split in fiscal treatment of pension contributions," the Association of Insurers (VvV) said in a statement.

"The benefits of the non-deductible part of the premiums will not be taxed in the future. The consequence is the providers need to set up a totally separate administration for a relatively limited number of participants.

"In addition, the pensions providers need to adjust thousands of pension contracts, which will cause high administrative costs," the association continued.

According to the VvV, the measure will again lead to confusion for pension providers and their customers, who have recently been confronted with numerous new rules.

"The plans mean an unnecessary breach of the present pensions system, and will lead to quite an increase of costs," the Foundation of Company Pension Funds (OPF) responded. It has already asked the cabinet to reconsider its intention.

According to the association of industry-wide pension funds, the income cap might start an irreversible trend, which could damage the whole pensions system.

"The plan threatens to cut the direct link between income and pension, and violates the legal certainty," the Union of Occupational Pension Funds (UvB) also commented.

"This way, the pension build-up becomes an instrument for income policy. Workers with an income under the proposed cap have reason to worry and should wonder when it will be their turn to be capped," UvB added.

At the same time, the government has said it will refrain from additional measures to facilitate the build-up of a pension by self-employed workers. According to the cabinet, self-employed have sufficient options to build-up an additional pension.

During the parliamentary discussions on the new Pensions Act, MPs had asked the government to look into the issue.

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