In the Netherlands, pensions consist of at least one of the following elements: a state pension, a supplementary pension, and/or private insurance.
Old Age Pension (AOW)
In general, everybody who reaches the state pension age in the Netherlands will receive a basic state pension: the general old age pension (AOW). Everyone who resides or works in the Netherlands builds up this pension over the years. The state pension age (AOW age) is gradually changing, until it reaches 67 years in 2024. In 2028 the state pension age will be raised again, to 67 years and 3 months. Many employees accumulate a supplementary pension through their employer. As an entrepreneur you can also build up a supplementary pension, but you must arrange this yourself.
Old Age Pension (AOW) for entrepreneurs
If you live and work in the Netherlands, you will almost certainly be insured under the general old age pension scheme (AOW). You pay the contribution to the Dutch Tax and Customs Administration (Belastingdienst) through your income tax/national insurance contributions. The amount of your AOW pension depends on the number of years you have been insured under the AOW scheme. It also depends on whether you live with someone or on your own. Have you lived or worked abroad and have not paid any premiums? Then you are not covered for this period and you will receive less AOW pension.
Old Age Pension (AOW) for your employees
You pay AOW contributions for your employee to the Dutch Tax and Customs Administration. You withhold part of the contribution from your employee’s wages or payments. In some industries a company or sectoral pension fund (Bedrijfstakpensioenfonds, Bpf) is compulsory. Has your employee reached the AOW age? Then you can end the employment contract. Your employee may also continue working but this will affect payment of contributions and taxes.
Supplementary pension
The AOW is a basic state pension. So, it is very likely that this is less than you used to earn when you were working. You can build up a supplementary pension through a group pension scheme. A compulsory supplementary pension through a company or sectoral pension fund is usually not available for entrepreneurs. However, if they, for instance, work in the notary or healthcare sector or in ports, they can arrange a supplementary pension with their occupational pension fund. The construction and finishing sector, for instance, offers a sector pension fund. Entrepreneurs may also choose to join a General Pension Fund (Algemeen Pensioenfonds, APf).
Mandatory pension fund
Are you an entrepreneur working in an industry with a mandatory pension fund? Then you must participate, even if you are a self-employed professional. If you had employment before becoming self-employed, you can sometimes voluntarily continue the pension scheme of your former employer. In that case, the pension contribution remains deductible for 10 years.
Examples of supplementary pension
There are many ways to further supplement your pension, for instance:
special bank savings accounts and retirement annuity contract (lijfrenteverzekering)
pay off your mortgage or loan, so you will have lower (living) costs when you reach pension age
join one of the voluntary pension funds for self-employed professionals
join a general pension fund
participate in a sectoral pension fund
Pension after death
Do you have a partner at the time of your death? In most cases, your partner is entitled to a survivor benefit (nabestaandenpensioen) under the National Survivor Benefits Act (Algemene Nabestaandenwet, Anw). This is subject to certain conditions. If you pass away, your partner can receive a part of your pension rights.
Right to retirement pension information
Pension funds must provide you with sufficient and proper information concerning your pension, so that you know what to expect upon retirement. This information must also clearly show the financial implications of any choices you make or of any changes that may occur in your personal situation. The information is provided by your pension fund through Mijnpensioenoverzicht.nl (in Dutch).
FAQs
There are pros and cons to both plans, but pensions are generally considered better than 401(k)s because they guarantee an income for life. A 401(k) can be more aggressively managed by the individual, which could create more growth than is likely from a pension fund.
How much does a pension give you? ›
As an example, a pension plan might pay 1% of their average salary for the final five years of employment for each year of the person's service at the employer. So an employee with 35 years of service at that company and an average final-years salary of $50,000 would receive $17,500 a year.
Are pensions paid for life? ›
A pension payment is a set monthly payment payable to a retiree for life and, in some cases, for the life of a surviving spouse. Some pensions include cost-of-living adjustments (COLA), meaning payments are indexed to inflation.
How does a pension work if you quit? ›
Pension Options When You Leave a Job
Typically, when you leave a job with a defined benefit pension, you have a few options. You can choose to take the money as a lump sum now or take the promise of regular payments in the future, also known as an annuity. You may even be able to get a combination of both.
Can you cash out a pension? ›
Whether you're eligible to cash out your pension will depend on the terms of your plan and how long you've been enrolled in it. If you are in fact eligible, you may have the option to take a lump sum distribution and roll it over into an IRA to defer taxes on the money.
Is having a pension a good thing? ›
Your pension helps you to maintain your standard of living in retirement, and savings provides important supplemental income for unforeseen expenses. Group pension plans provide guaranteed, monthly income for life, which makes financial security in retirement much more achievable for those who have them.
How many years to get full pension? ›
You usually need 35 qualifying years of National Insurance contributions to get the full amount. You'll still get something if you have at least 10 qualifying years - these can be before or after April 2016.
What is the average monthly pension payment? ›
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How long is pension paid after death? ›
Monthly benefit without an option
If you elected the Member-Only Benefit for your Defined Benefit pension, you will receive it for your lifetime—no continuing monthly benefit will be payable to another person or beneficiary after your death.
Are pensions taxed? ›
The taxable part of your pension or annuity payments is generally subject to federal income tax withholding. You may be able to choose not to have income tax withheld from your pension or annuity payments or may want to specify how much tax is withheld.
Spouse benefit provisions of private pension plans reflect the influence of the Employee Retirement Income Security Act of 1974 (ERISA) . Pension plans are not required by law, but once established, ERISA requires that they provide for annuities to spouses of deceased employees.
Can a pension be inherited? ›
Typically, pension plans allow for only the participant—or the participant and their surviving spouse—to receive benefit payments. In limited instances, some may allow for a non-spouse beneficiary, such as a child.
Can I run out of pension? ›
How long will my pension last for? Think of your personal pension as a large piggy bank – if you smash it open and spend it all at once, then it'll run out pretty much instantaneously. But if you take your time and only take a little bit from it at a time, then you can make it stretch a lot longer.
Can you lose your pension if you lose your job? ›
When a person is vested in a retirement plan, it means they have met the eligibility requirements to claim the employer-contributed part of their retirement funds. Being vested provides financial security because if an employee gets laid off or fired before retirement age, they can take the vested amount with them.
Can you cash in your pension? ›
Take cash lump sums
You can take your whole pension pot as cash straight away if you want to, no matter what size it is. You can also take smaller sums as cash whenever you need to. 25% of your total pension pot will be tax-free. You'll pay tax on the rest as if it were income.
Should I keep my pension or roll it over to a 401k? ›
There are some unique considerations for a 401k. Often these plans will have limited choices of funds, but also typically have lower fees. The main advantages of rolling your pension lump sum into a 401k are bankruptcy protection (limited for IRAs as well), continued deferred taxation, and simplicity.
What are the disadvantages of a pension plan account? ›
One downside of pension plans is that they typically have strict withdrawal and transfer rules. For example, in most cases, employees cannot access their pension benefits until they reach retirement age. Also, if they leave their job before retirement, they may be unable to take their pension with them.
Should I start a 401k if I have a pension? ›
401(k)s and IRAs provide income in retirement, too. But the amount depends on how much you contribute and how well your investments perform over the years. A good retirement strategy is to contribute to a variety of retirement investments, including 401(k)s and IRAs—even if you have a pension.
Why is a 401k not a good retirement plan? ›
The fund may lose all (or a substantial part) of its value in the markets just as you're ready to start taking distributions. While that's true of any financial investment, the risk is compounded by the relative inaccessibility of 401(k) money throughout the account's—and your—lifetime.
