Dutch pension system
The Netherlands is known for its great pension system. It is recognised as one of the best pension systems in the world. Together with its healthcare and high standard of living, this makes the Netherlands an attractive place for internationals to retire. Before considering retiring here, it is good to know how the system works.
The Dutch pension system is made up of 3 pillars which together determine the amount of pension a person will receive when they retire. These pillars are:
- The state pension (AOW)
- Collective pension schemes
- Individual pension products
State pension (AOW)
If you have lived or worked in the Netherlands, you are likely to have been insured under the AOW scheme. You will then be entitled to an AOW pension when you reach your AOW pension age, regardless of where you live. In 2021, the pension age will be 67 years old. From 2022 onwards, the pension age will depend on life expectancy. The state pension is provided by the Sociale Verzekeringsbank (SVB), which manages and implements the Dutch national insurance scheme.
The amount of your AOW pension depends on:
- the number of years you have been insured under the AOW scheme.
- whether you live on your own or with someone else.
For every year a person is insured, they build up rights to 2% of a full AOW pension. If a person has been insured for the full 50 years preceding their AOW pension age, they will receive a full AOW pension (50 x 2% =100%).
Married couples and couples living together each receive 50% of the minimum wage (approximately € 700 gross per month). Pensioners living alone receive more, 70% of the minimum wage (approximately € 1000 gross per month).
Collective pension schemes
Collective pension schemes are connected to a specific industry or company. These pension schemes are administered by a pension fund or an insurance company. Collective pensions are financed from the contributions members of the scheme paid in the past and from the return on the investment of these contributions.
Although pension funds may be connected to a particular company or industry, they are required by law to remain legally and financially independent and must operate as non-profit organisations. In this way, pension funds are protected if a related company has financial problems.
In the Netherlands there are 3 different types of pension funds:
- Industry-wide pension funds (for a whole sector, such as the civil service, construction industry, hotel and catering industry or the retail sector).
- Corporate pension funds (for a single company or a corporation).
- Pension funds for independent professionals such as medical specialists and dentists.
Individual pension products
Individual pension products are mainly used by the self-employed and employees in sectors without a collective pension scheme. Anyone can purchase a product in the 3rd pillar to meet his/her requirements. In this way, people can save extra pension, often taking advantage of tax benefits.
What will happen with your pension when you leave the Netherlands?
There might come a time that you will leave the Netherlands before you reach your pension age. What will happen with your pension then? You will still be able to receive your state pension, depending on how long you have lived in the Netherlands and at what point you leave.
State pension if you move abroad before you retire
If you start living or working outside the Netherlands before you retire, you will cease to be covered under the AOW old-age pension scheme and the Anw survivor benefit scheme. Consequently, you will get a reduced pension. You can avoid these consequences by taking out voluntary insurance.
State pension if you move abroad after you retire
If you move out of the Netherlands after you retire it is possible to receive state pension depending on the country you move to.
Collective pension schemes if you move abroad before and after you retire
It is usually possible to transfer your pension scheme abroad (before retirement) or receive pension benefits (after retirement), however, check with your Dutch pension fund what the financial implications are if and when you move out of the Netherlands. Always keep track of your pension fund administration, so you can contact your pension fund when you do not hear from them when you are abroad.