The possibility to terminate a pension in Pillar 2 with effect from 1 January 2026 changes the existing pension scheme arrangements and creates a new administrative process that employees, employers and accountants have to deal with in practice.
Although termination of a Pillar 2 pension is a right of the employee, its implementation is a phased process and has some practicalities that are important to understand in advance.
What is the termination of a Tier 2 pension and what changes from 2026?
Termination of the second pillar of the pension means the employee’s decision to opt out of further pension provision in pillar 2. From 2026, this option becomes explicitly regulated, but the process itself is not instantaneous – it involves a period of assessment and administrative steps related to the accounting by Sodros.
It is important to understand that Tier 2 pensions and their termination have a direct impact on both the employee’s salary and the employer’s tax calculations.
How does the termination of a tier 2 pension at the initiative of the employee work?
A typical situation is as follows: an employee applies to terminate his/her Tier 2 pension at the beginning of the year.
However, the decision does not take effect immediately, but is only assessed and approved after the end of the first quarter of the year.
For this reason, the accounting systems still apply the current pension tier 2 rate of 3% in January, February and March.
Why doesn’t the termination of a Tier 2 pension take effect immediately?
Until the decision to discontinue the pension accrual in Tier 2 is finalised, the employer’s accounting department calculates, deducts and transfers the contributions to Sodra on the basis of the data in force at that time.
This means that the second tier is technically still considered active, even if the worker has already applied.
“Sodra and termination of Tier 2 pension – how are recalculations done?
At the end of the quarter and after the termination of the Tier 2 pension is confirmed, Sodra recalculates the contributions retroactively from January.
In this case, it is found that some of the Tier 2 pension contributions have been overpaid, so the overpayments are returned to the employer.
This creates additional steps for the accounting department: recalculating wages for previous months, adjusting tax returns and paying out any differences to employees. For employees, this may result in a change in wages for previous periods.
How can I avoid salary recalculation when I stop contributing to my Tier 2 pension?
In practice, it is possible to avoid these recalculations. If the employee submits a request for the termination of the Tier 2 pension and also submits a request for the suspension of the Tier 2 pension contributions, the scheme may apply a 0% rate from the beginning of the following month.
In this case, the January contribution is still payable, but from February onwards, the Tier 2 accrual is no longer calculated, so there is no need to adjust payroll and tax returns.
Suspension of Tier 2 pension – why is it important to make an additional request?
Suspending the Tier 2 pension is a practical solution to reduce the administrative burden. Although the termination of the second pillar pension itself is subject to final approval at a later stage, the suspension of contributions can immediately ensure that the employee’s salary is calculated correctly.
What is important for employers and accountants to know about the termination of a Tier 2 pension?
It is essential for employers to clearly inform employees that if they decide to terminate their pension in Pillar 2, they must submit two separate requests – one for termination and one for suspension of contributions.
This solution allows for a smooth administration of the termination of the Pillar 2 pension, avoids accounting errors and reduces the additional workload for the accounting staff.
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