The Dutch pension system is often cited as one of the best in the world. With a well-structured, three pillar approach, it provides financial security in old age for both Dutch citizens and expatriates living and working in the Netherlands.

The Netherlands, as all the European countries, face an ageing population which will have a major impact ont he design of the pension schemes. In Europe, pension systems differ largely from country to country.

The Dutch pension system is built on three pillars. Depending on an individual’s circumstances, a retiree may receive benefits from just the first pillar, from both the first and second, or from all three pillars.

The Three Pillars of the Dutch Pension System

The Dutch pension system operates on three key pillars, providing a combination of state, company, and private pensions

1. General Old Age Pensions Act (AOW)

The first pillar is AOW, the Dutch state pension, a basic income provided by the government to everyone who has lived and worked in the Netherlands.

The Dutch state pension provides a basic income, the level of which is linked to the statutory minimum wage. The General Old Age Pensions Act came into force in 1957 and is the foundation for the old age pension benefits.

This first pillar is a pay-as-you system. This means that the costs of the Dutch state pension are paid by social security contributions and additional funding coming from government public funds.

2. Company Pension Plan

The second pillar is a company pension plan, as employers in the Netherlands could offer a pension scheme. Companies are not legally required to implement a company pension plan, unless the government has made a pension scheme mandatory for en entire profession or sector.

When a company pension scheme is introduced it is often a Defined Contribution (DC) scheme. The retirement income received depends on the savings accumulated during the working years for the company.

When a company decides to offer a pension plan to its employees, it typically works with external providers such as pension funds, insurers, or brokers to establish and manage the pension scheme.

Pension funds are legally and financially independent and the financing is through capital funding. This means pension is financed by the contribution of employees paid in the past and from the return on investment of these contributions.

Types of Pension Funds

1. Industry-wide pension funds: These funds serve entire sectors, such as construction, hospitality, or retail.
2. Corporate pension funds: These are pension funds set up for employees of a specific organisation.
3. Independent pension funds: These funds cater to self-employed professionals, such as medical specialists or dentists.

3. Private Pension Plans

The private pension plans are voluntary contributions made by individuals through private pension funds, offered by banks and insurance companies. They serve to top up the Dutch state pension and company pension scheme pensions.

Pension Regulation

The Dutch government has entrusted pension regulation to two key authorities: the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM).

• The Dutch Central Bank (DNB)

The Dutch Central Bank (DBD) examines, under the Pensions Act and the Financial Supervision Act, the financial positions of the pension funds and is responsible for monitoring if the pension funds comply with the standards.

• Netherlands Authority for the Financial Markets

The Netherlands Authority for the Financial Markets (AFM) monitors the behaviour of the pension funds including duty of care to provide certain information to their stakeholders.

Basic State Pension Netherlands

AOW (Algemene Ouderdomswet) is the Dutch state pension. It is funded through tax and social security contributions made by the residents in the Netherlands.

The amount received depends on how many years lived or worked in the Netherlands and is tied to life expectancy and changes periodically. Currently, the pensionable age is 67 years (data 2024).

To receive the full AOW pension, residents must have lived or worked in the Netherlands for 50 years. If residents worked fewer years in the Netherlands, the Dutch state pension will be reduced proportionately.

How Does Pension Work in the Netherlands?

Pensions in the Netherlands are built over time through contributions. For the state pension (AOW), everyone living or working in the Netherlands contributes through taxes.

For company pension schemes, contributions could be made by only the employer, or the employer could decide for an employee contribution.

Mijnpensioenoverzicht.nl is an excellent online tool for tracking pension benefits for residents working for one or multiple employers. It offers a clear overview of all accrued pensions and provides insights into expected future pensions based on the employee’s current employment status.

Company Pension Scheme

Claiming Dutch Pension when leaving the Netherlands?

If a resident leaves the Netherlands, they still claim Dutch pension only when reaching the pensionable age, even when living abroad. The contributions to the Dutch state pension (AOW) and the company pension plan (if the employer has a plan) are preserved. For private pension schemes it will depend on the terms of the specific plan.

With a robust, well-regulated system, retirees in the Netherlands benefit from financial security through AOW, company pensions, and private savings.

Mandatory Employee Benefit

The Dutch state pension (AOW) is mandatory for all residents, but in the Netherlands companies are not legally required to implement a company pension plan, unless the government has made a pension scheme mandatory for en entire profession or sector.

Transferring Pension Rights

Employees who change employer in the Netherlands (not abroad) can transfer their accrued pension to their current employer’s company pension plan. However, employees are not obliged to transfer their accrued pension.

Pension Key Takeaways for HR Professionals and Entrepreneurs

For HR professionals and entrepreneurs, understanding the Dutch pension system is essential for compliance, employee satisfaction, and financial planning.

• Mandatory Contributions

AOW (Dutch state pension) is mandatory for all residents, funded through social security contributions.

The company pension plans could require sector agreements or regulated by collective labour agreements, meaning most businesses must offer a pension scheme for employees.

• Employer-Employee Contributions

Company pension schemes typically could involve joint contributions from both employer and employee.

• Defined Contribution (DC) Schemes

The most common form of a pension scheme in the Netherlands is the Defined Contribution (DC) scheme. Ensure your employees are aware that the eventual pension payout depends on the accumulated savings rather than a fixed amount.

• Pension Portability for International Employees

For businesses with international employees, it is important to note that expats can take their Dutch pension benefits with them when leaving the Netherlands.

• Communication

Dutch pension law requires employers to inform employees clearly about the structure and conditions of their pension plan through a standardized communication tool known as the 123 Pension Communication Plan.

• Employee Benefits Support

Offering resources or Pension consulting services to employees regarding their pension planning can improve employee satisfaction and retention.

• Company pension committee

The pension committee plays a crucial role in overseeing and managing the company’s pension plan, ensuring it aligns with both the organization’s objectives and employees’ retirement needs.

This committee typically consists of key stakeholders such as HR, finance, external pension specialist and a Works Council member.

HR Consulting Firm as a Strategic Partner

While pension brokers are essential for setting up and managing the financial side of the company pension plan, we can bring as HR consulting firm the practical employee and HR perspective.

From managing the project timeline to communicating the benefits and providing ongoing training, Human in Progress ensures that the pension plan rollout is seamless, well-understood, and embraced by employees and in compliance with the Works Councils Act.

By hiring an HR consulting firm, your organisation gains a strategic partner who supports the pension broker, entrepreneur, Works Council and HR professionals with the practical side of pensions, but also empowers them with the knowledge and tools to make informed decisions.

This comprehensive HR consulting approach improves employee satisfaction but also positions the company as a forward-thinking employer that invests in its people’s long-term financial well-being.

Contact us today!

More Information

• Pension Netherlands – Key Terminology Explained.
• Works Council Netherlands and Mandatory Pension Requirements.
• HR Consulting Services
• Employment Law Netherlands.