In the Netherlands, many expats work as freelancers. In this country, you are considered a freelancer when you perform services for a client without having an employment contract and without having set up a separate company.
Being a freelancer in the Netherlands
Freelancers are required to draw up and sign a specific type of contract with a client that defines the working relationship. This is to clarify who will be responsible for contributing to the freelancer's welfare or unemployment benefits.
So, what does the freelancer status mean for your pension situation?
Pillar 1: State pensions
Every expat who lives and works in the Netherlands is covered by Dutch social security, which is implemented by the SVB. The state pension includes AOW (old age pension) and ANW (next of kin pension).
AOW
If you have lived in the Netherlands for 50 years from the age of 15, you are entitled to full benefits at retirement age. The official retirement age is set at 66 years. In 2021, it will increase to 67 years. Currently, you will receive 10.470 euros (pre-tax) per person when married, and 15.206 euros (pre-tax) when single.
Many expats have lived in other countries before moving to the Netherlands, which generally results in a reduced AOW coverage. For these expats, it is good to know that it is possible to, on a voluntary basis, acquire additional AOW rights.
Likewise, many expats leave the Netherlands and may not generate substantial state pension rights in their new countries. Under certain conditions, they can prolong their Dutch AOW and ANW coverage.
ANW
The next of kin pension is called ANW. When your partner passes away, a modest pension will be paid until retirement age. However, the criteria are strict and the amount you will get depends on your income.
WW & WIA
Please be aware that Dutch social security does not include employment agreement related unemployment (WW) and disability (WIA) coverage. The WW and WIA are implemented by the UWV.
Pillar 2: Corporate pensions
As a freelancer, you do not have an employment contract, which means that, from a legal perspective, you cannot be covered by a corporate pension plan. Generally, a corporate pension scheme is an important factor for acquiring sufficient old age and next of kin pension coverage, so freelancers might want to see how they can close the gap.
Pillar 3: Private pensions
One of the ways to close the aforementioned gap is to acquire a private pension. In the Netherlands, each taxpayer can acquire a private pension and, to a certain extent, one with full tax benefits. This means that the premium can be deducted from your taxable income. The amount of tax benefits you are entitled to is determined annually.
For 2018, this is a maximum of 12.362 euros. If you have not (completely) used your tax benefits over the last 7 years, you can still do so in the current fiscal year, with a 2018 maximum of 14.152 euros.
While determining your personal maximum tax benefits, the tax authority also takes into account already existing pension claims. Such existing claims decrease your personal annual tax benefits.
PEPP for freelancers
In June 2017, the European Commission introduced “PEPP for Expats”. This might become a private annuity that is transferable throughout the EU for each EU citizen. The EU hopes to create the PEPP with annual tax benefits. However, currently, the PEPP is still being developed. I believe that the PEPP can only be an interesting alternative for freelancers if it has equal tax benefits.
Tailored advice
Make sure your coverage reflects your wishes. It is not advisable to be lacking in terms of coverage, but it is equally inadvisable to pay unnecessary premium costs.
Moreover, don’t forget to include already acquired state, corporate or private pension claims in your pension planning. It is also good to check if a transfer of value is possible and if this is desirable.
Furthermore, when it comes to private pensions, there are many different product, cost, risk and investment possibilities. Therefore, it is smart to seek professional and tailored advice.
The Expat Pension Holland approach is to translate complex situations into clearly communicated advice.
Due to all the legal, tax, actuarial and product aspects, it is in your own interest that a licensed advisor carefully assess your situation and provide balanced and first-rate advice.