Your pension! How does it work in the Netherlands?

Maybe you are still a long way from retirement, but in case you’re working in the Netherlands for a couple of years, or maybe until you reach pension age, it’s good to know what to expect.

Below you can read a brief overview of how pensions work in the Netherlands.

The AOW state pension

What does AOW mean? AOW stands for: Algemene Ouderdomswet, The Dutch General Old Age Pensions Act.

The General Old Age Pensions Act (AOW) provides basic state pensions for people living in the Netherlands aged 65 and over. It provides you with a lifelong basic income from the government.

The amount of the AOW pension you receive depends on the number of years you have been living and working in the Netherlands.

A pension scheme from your employer

If you start working in a company in the Netherlands, you need to check with the HR department if they have a pension commitment.

If there is such a pension scheme, it covers all employees. Never compare this with commitments from other companies because they can vary between organisations.

There is no law that obliges employers to offer a pension, unless the company belongs to a sector with a collective pension fund, or if pensions are covered in the company’s collective labour agreement.

The way your employer contributes, and what you have to contribute, can also vary depending on the organisation.

Supplementing your state pension

Since the state pension is not enough to live off by itself, there are two ways to increase your retirement income in addition to the AOW:

1. You can receive an occupational pension benefit from your employer(s), as mentioned above.
2. You can build up and benefit from your own personal pension provisions.

Personal pension provisions

Maybe you know that there will be some gaps in your pension accrual, which can lead to a deficit in your pension.

You can do something about these gaps by considering options such as establishing your own pension contribution scheme, or investing in pension products.

Since these affairs are never easy to deal with, it’s wise to seek guidance from a financial expert. The expert can advise you what would be best in your situation, such as tax reductions, saving or investing.

Does a Freelancer has the right to AOW and other pension schemes?

If you are self-employed, and you have contributed to turnover and income taxes, then you are entitled to receive the AOW basic state pension.

However, because you are a freelancer, you are not covered by the pension commitment of your employer or clients, so you cannot participate in their scheme for employees.

Of course, you can make your own arrangements and also take advice from a financial expert or the tax authorities. They can tell you how you can benefit as a freelancer from special tax allowances.

Know your pension rights in advance

You can check the status of your pension any time on Pensioenkijker. This website is only in Dutch, however your pension provider is also obliged to send you updates on a yearly basis.