Did you know that since you came to live in the Netherlands you are accumulating a pension and maybe you didn’t know it?
Thinking about pensions is one of those things that is so far away that it is often taken lightly. In this post I will explain a bit about how the Dutch pension system works.
The pension system in the Netherlands can be seen as a 3-storey house, ground floor and two levels. The ground floor consists of the Dutch government pension, the first floor consists of the collective pension (which you accumulate via your employer) and the first floor consists of the pension that you accumulate voluntarily.
When you reach retirement age, your pension will consist of the sum of the 3 floors as shown in the table below. It may be the case that you only have one of the floors, in which case your future pension may not be sufficient. Below I explain each floor in a little more detail.
| Example 1 | Example 2 | Example 3 | |
| 1. Government pension (AOW) | € 980 | € 980 | € 980 |
| 2. Collective pension | € 0 | € 1500 | € 1500 |
| 3. Individual Pension | € 0 | € 0 | € 1500 |
| Total monthly | € 980 | € 2480 | € 3080 |
Floor 1- Government Pension (AOW)
What is it and how do you get it?.
Commonly known as AOW (Algemene Ouderdomswet) this is the first floor of the pension house, you are accumulating it from the moment you arrived in the Netherlands, it starts to accumulate 50 years before the retirement age (67 years in 2024), every year it accumulates 2%; this means that a person living or working in the Netherlands between the age of 17 and 67 accumulates 100% of the government pension. If you want to know when it is your turn to retire you can consult the link https://www.svb.nl/nl/aow/aow-leeftijd/uw-aow-leeftijd
For those of us who arrived in the Netherlands after the age of 17, we do not receive 100% of the government pension. For example, if you arrived to The Netherlands at the age of 25 you only get 84% (67-25 = 42, 42 x 2 % = 84%).
How much will I get?
Depending on your situation it is estimated that the state pension will be between €586 – €1.334,- per month. You can see how much government pension you will get at the following link https://www.mijnpensioenoverzicht.nl/
The government pension is paid by the SVB (Sociale Verzekeringsbank – Social Insurance Bank) https://www.svb.nl/en/aow-pension.
What happens if I move from the Netherlands?
Once you reach pensionable age, you can claim a pension from the SVB (Sociale Verzekeringsbank – Social Insurance Bank), even if you live outside the Netherlands. You should be aware that the SVB does not pay the money to just any country. There must be an agreement between the country where you live and the Netherlands for you to receive 100% of your AOW pension. For example, Mexico does not have an agreement with the Netherlands, so the SVB will only pay 50% of the AOW if you live permanently in Mexico.
You can check how is the situation per country in this link https://www.svb.nl/en/aow-pension/claiming-an-aow-pension-if-you-live-outside-the-netherlands/you-are-going-to-live-outside-the-netherlands
Floor 2- Collective pension (via work)
What is it and how do you get it?
If you are self-employed, an entrepreneur, etc. this part of the pension does not accrue, but if you are employed, you almost always accrue a pension through your employer. This pension is part of your working conditions and companies are not obliged to offer it. The company where you work pays a premium to the pension provider (a pension fund or an insurance company). Normally one part is paid by the employee and one part by the employer. If you change jobs, it may be the case that your new employer has a different pension fund/provider, in which case you would have some pension money in each fund/provider.
There are different schemes depending on the employer:
- Final salary scheme (eindloonregeling): in this case, the pension is based on the last salary received just before the date of retirement.
- Average salary scheme (middelloonregeling): the pension is based on the average salary you received while working for the company.
- The defined contribution scheme (beschikbare premieregeling): in this case, you do not know exactly how much your pension will be later on. This is the system of the new pension rules, which is explained below.
Defined contribution scheme (beschikbare premieregeling)
In the new pension system, agreements are made about the amount of money (premium) that you and your employer contribute to your pension. This makes it easier to know how much you have contributed and how much capital you have built up.
The company pays a premium to the pension provider (and usually you also pay a share). The pension provider invests this money in your pension account. Sometimes the return is guaranteed and you will know how much your pension capital will be at retirement. Often, the money is invested and you have to wait to see how much your pension account is worth.In the new pension system, agreements are made about the amount of money (premium) that you and your employer contribute to your pension. This makes it easier to know how much you have contributed and how much capital you have built up.
The company pays a premium to the pension provider (and usually you also pay a share). The pension provider invests this money in your pension account. Sometimes the return is guaranteed and you will know how much your pension capital will be at retirement. Often, the money is invested and you have to wait to see how much your pension account is worth.
Just before the retirement date, the pension provider will notify you that pension money is available. With the money, you have to buy a pension (pensioenuitkering). You can do this with the pension administrator where you have your pension account or with another pension administrator. It is a good idea to check which pension administrator offers the highest pensions.
How much will I get?
The pension you accumulate in this flat is added to the amount you will receive as a government AOW pension. The amount of your pension will depend on how much is paid into your pension account each month. The amount you save each month is deducted from your salary.
To get an idea of how much you would receive based on a projection of your current situation see https://www.mijnpensioenoverzicht.nl/.
What happens if I move from the Netherlands?
This pension, depending on which company you have it with, is paid even if you move out of the Netherlands. You should ask the company where you have the pension what happens if you move out of the EU.
Floor 3- Individual Pension (Voluntary Contributions)
What is it and how do you get it?.
This part of the pension is accumulated under your own management. You decide how much money to put in it, you need to open a pension account (pensioenrekening) with a bank or some other company like Brand New Day for example. This money is invested in the stock market so that it can grow over time. If you want to know more about the Brand New Day pension account you can read the post here. You can also open an account with a broker such as Degiro and manage your own investment portfolio. The money you deposit in the pension account is tax deductible, and when you do your annual tax return you get back a portion of what you deposit in this account. The money you deposit there technically cannot be withdrawn until you reach retirement age. I did a post explaining a bit more about this type of Pension accounts in the Netherlands
The tax-deductible amount you can accumulate each year is called (Jaarruimte) and depends on whether you have a pension via an employer (collective pension).
How much will I get?
This will depend on the amount you have saved in your pension account. You can decide how the money you put into the account is invested.
When you reach retirement age, you can decide how many years you want the money to be paid out and how often you want it to be paid out.
What happens if I move from the Netherlands?
This account pays you as long as you move to a country in the European Union or that is on the list of countries with a treaty with the Netherlands. If you move permanently from the Netherlands outside the EU the money in the account can be withdrawn but this causes such a high tax rate that it is better to look for alternatives.
Are there other alternatives?
Another way to invest for your retirement is to do it in a normal investment account, you will not have tax benefits but the money will always be yours and you can withdraw it whenever you decide. You can read more about this account here.
