The Netherlands is frequently recognised as having one of the world’s top ranking pension systems by the Melbourne Mercer Global Pension Index. This high ranking is thanks to the diversity of the Dutch pension system’s funding sources, its accuracy in measuring costs and contributions to ensure fair distribution, and its strong regulation by the Dutch Central Bank and the Dutch Authority for the Financial Markets.
In comparison to many other countries, the Netherlands is relatively well-prepared to deal with the issue of an ageing population as it incorporates different models of pension funding with a policy of solidarity and risk-sharing.
The Dutch Pension System
The Dutch Pension system combines a pay-as-you-go system, where the working population pays for the benefits of pensioners, with an individual investment system. In the individual investment system, collectives and individuals make high- and low-risk investments to supplement what they will receive from the state pension. These different models can be defined as the three pillars of the Dutch pension system.
The 3 pillars of the Dutch pension system
The Dutch pension system is made up of three pillars which together determine the amount of pension a person will receive when they retire. These pillars are:
Pillar 1: The state or AOW pension
The state or AOW pension (basispensioen) is paid from the age of 66 and provides basic benefit payments of up to 70 percent of the minimum net wage. Under the General Old Age Act or Algemene Ouderdomswet (AOW), which came into effect in 1957, all people who have lived or worked in the Netherlands between the ages of 15 and 65 are entitled to receive the state pension.
How much state pension will I receive?
The amount of state pension you receive depends on the pension rights you have built up during your working life in the Netherlands. Each year that a person pays (health) insurance in the Netherlands they accrue two percent of the state pension benefit. People who do not work will also accrue state pension rights.
Maximum monthly state pension payments
To have a general idea of how much a person can expect to receive each month from the state pension it’s possible to look at the standard example of people who have lived in the Netherlands from age 15 to 65 and who receive a full pension:
- Couples living together
Around 700 euros each gross per month (50 percent of the current minimum wage). - People living alone
Around 1.000 euros gross per month (70 percent of the current minimum wage).
State pension must be combined with other pillars
It is important to note that the Dutch state pension only provides limited financial benefits for retirees and must be supplemented with benefits from Pillar 2, Pillar 3 or both.
The state or AOW pension is provided by the Sociale Verzekeringsbank (SVB) which manages and implements the Dutch national insurance scheme.
Pillar 2: Pension funds
The second source of Dutch pension benefits are pension schemes connected to a specific industry or company. Such schemes are managed by pension funds (pensioenfonds) or insurance companies.
Companies pay monthly contributions into the pension funds on behalf of their employees. The capital is invested and the return on investment pays for the benefits of current and future retirees. Employees can choose what kind of scheme they prefer to have within their pension fund. It is important to update the details of your employer with your pension fund whenever you find a new job.
Pension funds are non-profit
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.
Different kinds of pension funds
There are three kinds of collective pension funds in the Netherlands:
- Industry pension funds, which cover people working across an entire sector such as the hotel, catering, retail, construction industries, or the civil service.
- Corporate pension funds, for a single company.
- Independent professional pension funds for medical specialists, dentists and the like.
Pension funds are mostly mandatory
By making pension funds compulsory in most industries, the Dutch government aims to provide solidarity, stability and a good pension scheme for all employees. The majority of pension money in the Netherlands is managed by pension funds, and more than 90 percent of employees in the Netherlands have a pension scheme via their employer.
How much do I have with my pension fund?
To find out what pension rights you have accumulated in your pension scheme you can contact your pension fund or check the annual statement they send you. You can check your company’s contribution payments on your salary slip.
What happens to my Dutch pension fund if I move abroad?
It’s 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. Expats often lose track of accumulated pension rights when they change country, and pension funds are not always active in chasing up members, so it’s important to maintain your Dutch pension fund administration.
Pillar 3: Individual pension products
The third part of the Dutch pension system is individual pension products or supplements. Such supplements are mostly used by self-employed and employees in industries with no collective pension funds. In this way, individuals can independently buy and manage pension products or investments such as life insurance, shares or property, and take advantage of related tax breaks.
The Future Pensions Act
After years of debating, the Dutch government approved plans for a new pension system in the Netherlands. The transition to the proposed new system, known as the Future Pensions Act (Wet toekomst pensioenen), started on July 1, 2023, but may take a while before it is fully implemented. Unions, employers and pension providers have until January 1, 2027, to adapt their pension schemes to the new rules.
The Netherlands is changing its pension system because the Dutch labour market has undergone serious changes over the past few decades. For instance, employees are working longer, plus they are more likely to switch jobs. The new pension system better reflects and adapts to contemporary careers, making it more future-proof. So, what does this mean for you and your pension?
The changes that are implemented will impact your Pillar 2 pension in the following ways:
More transparency
The new pension system will make it clearer how much money you have invested into your pension and how much has been gained through investments.
Multiple individual funds
The new system will feature a more personal approach; instead of having one centralised pension fund at each pension provider that is shared among all customers, there will be individual pension funds for each customer. This means that you can access more personalised information about your pension accrual.
New contribution rules concerning the employee’s age
Previously, all employees paid the same premiums, no matter their age. This was generally considered unfair, as this meant that premiums paid by young employees could be invested by the providers for a longer time, which ultimately meant that there was more chance for these employees to absorb windfalls and setbacks. The new system makes sure that young employees are no longer investing in the pensions of older employees by changing how employees invest depending on their age. This new way of investing will also lead to reduced risks for older employees.
Compensation scheme
Employees who are mid-way through their careers (40+ age) could experience some disadvantages as part of the switch to the new system. This is why the Dutch government is arranging a compensation scheme for these workers.
Retirement age in the Netherlands
As in many countries, the age of retirement, when you are eligible to start receiving your pension, is being gradually pushed back by the Dutch government:
- In 2023, the age of retirement is 66 years and 10 months
- In 2022, the age of retirement was 66 years and 7 months
- In 2021, the age of retirement was 66 years and 4 months
- In 2020, the age of retirement was 66 years and 4 months
- In 2018, the age of retirement was 66 years
- In 2017, the age of retirement was 65 years and nine months
- In 2015, the age of retirement was 65 years
You can check the age at which you can retire by filling in your birth date on the SVB’s retirement calculator page.
Early retirement in the Netherlands
It is possible to retire early, but you must independently finance the period up until you reach the official retirement age. You may also request to have your retirement pension paid from a younger age, but the benefits will be substantially less as they will have to last longer. If preferred, you may also retire later, with the potential to considerably increase your pension benefits.
Living abroad and the Dutch state pension
It is possible to receive the state / AOW pension if you move out of the Netherlands. Whether you receive it, and how much, depends on several factors, mostly how long you have lived in the country and at what point you leave.
State pension if you move abroad before you retire
If you move out of the Netherlands before you retire then you will receive a reduced state pension as you will not be continuously insured for the AOW pension and will stop accruing pension rights. Additionally, you will not be covered by the Anw survivor benefit scheme for your partner if you pass away. To avoid a pension shortfall you can choose to take out voluntary AOW insurance within 12 months of moving abroad.
State / AOW pension if you move abroad after you retire
If you move out of the Netherlands after you retire it’s possible to receive the Dutch state pension (Pillar 1) depending on the country you move to. Visit the SVB page on living outside the Netherlands to see if your destination country will affect your state pension. In some cases, people moving overseas are eligible to receive remigration benefits from the SVB, depending on their country of origin and family situation.
Dutch pensions in a nutshell
In summary, if you have lived or worked in the Netherlands then you will receive a state pension (Pillar 1) but it will be proportional to the number of years you have spent in the Netherlands, and you must live in the Netherlands or in certain specified countries.
Whether you receive pension benefits from a pension fund (Pillar 2) depends on if you have signed a pension agreement with your employer and if you keep track of your Dutch pension scheme if you move out of the Netherlands. How much you will receive depends on the number of years you work, and on your salary.
You will only receive benefits from individual pension products (Pillar 3) if you have actively paid into or invested in a pension product such as life insurance, shares or property.
