The Lump Sum Review Act provides for the possibility for pension fund participants to withdraw up to 10% of their pension assets in a lump sum on (or shortly after) retirement date. However, in certain circumstances, withdrawing a lump sum may result in benefits for health care or rent being forfeited, or a higher total tax amount having to be paid than with regular periodic pension payments. On the other hand, for a participant who is not entitled to benefits for health care or rent in the case of regular pension payments, the reduction of the pension benefit as a result of withdrawing a lump sum may actually result in an entitlement to supplements for health care or rent. The choice of whether or not to withdraw part of the pension assets in a lump sum is thus not a simple one, and the financial consequences of an “ill-considered” choice can be significant.

As part of the pension provider’s legal duty of care, it is important to have a good understanding of the consequences of withdrawing or not withdrawing part of the pension assets in a lump sum, taking due account of tax aspects and consequences for benefits. The aim of this project is to identify the financial consequences of withdrawing part of the pension capital in a lump sum for the total net benefit pattern, taking into account the consequences for taxes and surcharges and the characteristics of the participant. The analysis thus aims to make an important contribution to fulfilling the duty of care of implementers.