The pension is an income protection insurance. If you live or work in the Netherlands, you accrue state pension rights in most cases. State pension (AOW) is a basic pension from the government that you receive if you have reached retirement age. You can accrue a supplementary pension in various ways. In the case of employees, that is often arranged via the employer, whereas self-employed people must come to an arrangement for this themselves.

State pension (AOW)

The state pension (AOW) is a national insurance scheme, a basic facility for anyone who has reached retirement age. Anyone who lives or works in the Netherlands accrues this automatically. If you live or work for part of your career abroad, you can take out additional insurance for the state pension (AOW) voluntarily. The amount of the state pension (AOW) is based on the minimum wage and depends on the number of years that you have accrued state pension rights and whether you live alone or cohabit. In the case of a single person who has full state pension rights this is 70% of the minimum wage.

Via the employer

An employer is not legally obliged to offer a pension scheme, but this is often agreed in a collective labour agreement (CAO). In that case, the employer and the employee both pay part of the pension contribution. A pension scheme falls under the fringe benefits. You should pay careful attention to this, therefore, if you sign an employment contract. Both the pension fund and the employer are obliged to inform you about how much you are accruing or have accrued.

Accruing a pension yourself

A state pension benefit (AOW-uitkering) is not enough for most people. If you do not accrue a pension, or not enough pension, via the employer, if you have a pension shortfall or if you are self-employed, it is wise to accrue an (additional) pension yourself. The National Institute for Family Finance Information (Nationaal Instituut voor Budgetvoorlichting, Nibud) has compiled all the advantages and disadvantages of the different options. Here is a short summary:

  • Saving with a regular savings account and/or investing
    You always have access to your money with a normal savings account. One disadvantage is that you pay wealth tax on this, above a certain amount, annually. This advantage and disadvantage also applies to investments.
  • Accruing an annuity amount
    You can do this through private pension insurance, annuity insurance, an annuity savings account (a tax-efficient blocked bank savings account providing a pension sum) or by taking out a single-premium policy. You pay a monthly contribution in the case of pension insurance or annuity insurance. In the case of a single-premium policy, you deposit an amount of your choice. The money is only paid out when you reach retirement age and will then be paid out ‘temporarily’ (for a period of 10 or 20 years) or ‘lifelong’. When taking out this policy, pay attention to: the costs, what happens with your accrued capital in the event of incapacity for work and death, transparency of the business operations, investment policy and the payment to be expected.

    When accruing an annuity amount, the premiums may be offset against your taxable income annually up to a certain maximum amount (the ‘annual margin’), which immediately results in a tax advantage. When the annuity amount is paid out, thus during the pension, tax will be paid on the payment on a monthly basis.
  • Making use of the old-age reserve up to and including 2022
    If you were regarded as a self-employed entrepreneur by the Dutch Tax and Customs Administration, you could reserve part of your annual earnings for your old age (FOR). This retirement reserve provided for deferment of taxation on that part of the profit. In the short term, that meant a tax benefit. Whether that would work out in the long term depended on your financial situation when you had to pay the tax. It was not a cancellation of tax payment.
    From 1 January 2023 you can no longer add amounts to an existing FOR. If you have a FOR on the balance sheet, the rules that previously applied apply when settling this FOR.

What suits me best?

Begin with an overview: on the website ‘mijnpensioenoverzicht’ (information in Dutch only), you will find a personal overview of your state pension rights and the pension that you have accrued via the employer. When you start accruing your pension, it is worth considering how you currently live, what you are investing in and what you think that you will need later. Do you have a company or a house that you can sell around your retirement age, will your overheads fall, because you are going to live in a smaller house, or are you actually going to need a higher income in order to finance your desired lifestyle?

A pension, financial and/or insurance adviser can help you come up with solutions that are best suited to your personal situation and wishes.