Pensions in the Netherlands
If you’ve come to work in the Netherlands, you might be looking towards the future and wondering about how the pension system is set up. As an expat, pension funds in the Netherlands might be a daunting topic. But the pension system in the Netherlands ranks highly in international ratings, and along with the country’s high quality of healthcare and standard of living, makes the Netherlands an attractive place for internationals to retire. So how does it work?
The Dutch pension system is a combination of pay-as-you-go and individual investment and is built upon three pillars:
- The state pension (AOW)
- Collective pension schemes
- Individual pension products
The State Pension (AOW)
The General Old Age Pensions Act or Algemene Ouderdomswet (AOW) ensures that all people who have lived in the Netherlands between the ages of 15 and their pension qualifying age are entitled to the state pension when they reach their pension age. From 2022 on, this age will be dependent on average life expectancy. All residents of the Netherlands accrue AOW every year – it is not a requirement to be in paid work to do so. The amount you receive depends, among other things, on whether you live alone or with a partner and is derived from the minimum wage. It is provided by the Sociale Verzekeringsbank (SVB). The SVB will show you approximately how high your AOW is or you can request a more detailed calculation. This information is available through My SVB. You will need a DigiD to access it.
For every year you are a resident of the Netherlands, you acquire 2% of a full AOW pension. If you’ve been insured for 50 years, you will receive the full amount.
The Dutch state pension provides limited financial benefits, so it must be supplemented with funds from the other pillars.
You can find out more about state pension in the Netherlands on the SVB website.
Collective Pension Schemes
Collective pension schemes are connected to a specific company or industry. These schemes are managed by pension funds or insurance companies. Employers pay monthly contributions into these funds on behalf of their employees, with the return on investment paying the benefits of both current and future retirees.
These pension funds may be connected to a particular company or industry. But the law requires that they remain legally and financially independent and must operate as non-profit organisations. This means that if the company you work for has financial problems, your pension fund will be protected.
There are three kinds of collective pension funds in the Netherlands:
- Industry pension funds, which cover those working across an entire sector
- Corporate pension funds for a single company
- Independent professional pension funds for professionals such as medical specialists and dentists
Individual Pension Products
Individual pension products in the Netherlands are predominantly used by those who are self-employed or work in a sector without a collective pension fund. Individuals independently buy and manage their own pension products or investments. Anyone can purchase a product under this third pillar.
Leaving the Netherlands?
Should you leave the Netherlands before you reach pension age, you will still be able to receive your state pension, depending on how long you lived in the Netherlands. Your pension will be reduced for each year you were not in the AOW pension scheme, but you can avoid this by taking out voluntary insurance. If you leave after retiring, it’s possible to receive your state pension abroad, depending on what country you move to.
Your collective pension scheme can usually be transferred pre-retirement or received after retirement. Either way, it is always good to check with your Dutch pension fund before leaving the Netherlands.
If you live in the EU, you will be able to transfer your EU state pension to the Netherlands via the SVB. This should be done at least six months before you reach your AOW pension age.
Aside from the ins and outs of pension funds in the Netherlands, there’s a lot more to know about working and living in the Netherlands. If you’re thinking of relocating, we have the resources you need for finding a job and on a variety of financial and legal matters, from insurance through the 30% ruling to taxes.