Dutch Pension System for Employers and Expats

Understanding the Dutch Pension System

Approximately 30% of Dutch residents are over 65 (transitioning to 67), surpassing the OECD average of 28%. With an average life expectancy of 82 years, the Dutch pension system is crucial for securing financial stability during retirement. The Netherlands consistently ranks highly in the Melbourne Mercer Global Pension Index, thanks to its diversified financing strategies and precise cost calculations that ensure fair distribution.

The Dutch pension system is built on three main pillars:

1. State Pension (AOW – Algemene Ouderdomswet)

2. Collective Pension (Employer-Sponsored Pension Plans)

3. Individual Private Pension (Personal Retirement Savings)

State Pension (AOW)

The AOW pension is the foundation of the Dutch retirement system, providing a basic income for retirees. The state pension typically covers 70% of the last earned salary but is often insufficient to maintain one’s pre-retirement lifestyle. Because of this, most employers in the Netherlands offer an additional collective pension scheme as a key employee benefit.

Collective Pension (Employer-Sponsored Pension Plans)

Over 90% of businesses in the Netherlands provide a collective pension to their employees. While not always mandatory, certain industries require employers to participate in sector-wide pension funds. Independent pension funds and insurance providers manage these pensions.

Types of Collective Pension Plans:

1. Industry-Wide Pension Funds (Bedrijfstakpensioenfonds - Bpf)
   Employers in specific industries, such as construction, manufacturing, and healthcare, must enrol their employees, including independent contractors, in a sector pension fund.

2. Occupational Pension Funds
   Professional sectors like healthcare, notaries, and maritime industries have mandatory occupational pension schemes.

3. ABP Pension Plan
   Public sector employees, including those in education and government institutions, are automatically enrolled in the ABP pension fund.

4. Optional Collective Pension Plans
   Businesses not required to join a sector pension fund can still opt for a collective pension scheme. Some companies offer alternative employee benefits, such as higher salaries or customised perks, for employees who do not require a pension plan.

Individual Private Pension

This third pillar consists of voluntary retirement savings, particularly beneficial for self-employed professionals and those working in industries without a mandatory pension scheme. Employees can invest in life insurance policies, stocks, and real estate, benefiting from tax advantages on contributions.

Setting Up a Pension Plan as an Employer

Navigating the Dutch pension system can be complex, particularly for international companies. If you are an employer in the Netherlands, consider the following steps when establishing a pension plan for your workforce:

Step 1: Verify the Collective Labor Agreement (CAO)

If a CAO (Collective Arbeidsovereenkomst) applies to your industry, you may be required to offer a specific pension scheme. Some industries have strict regulations, while others provide flexibility in pension offerings. You can check the CAO agreements for industry-specific pension requirements (available in Dutch).

Step 2: Understand Employee Demographics

Choosing the right pension plan depends on employee demographics, including age, lifestyle, and nationality. For instance:

• Employees with families may prefer pension plans that extend benefits to spouses and children.

• Expats and non-EU employees may require pension options that allow international transfers.

• Younger employees may favour flexible retirement plans with investment options.

Step 3: Use Pensions as a Competitive Advantage

A well-structured pension plan can be a valuable tool for attracting and retaining top talent. Offering a superior pension package compared to industry standards can enhance your company’s reputation as an employer of choice. Research your competitors’ pension schemes and consider offering enhanced retirement benefits to strengthen employee loyalty and job satisfaction.

What Happens to Your Pension When You Leave the Netherlands as an Expat?

If you leave the Netherlands as an expat, your accumulated pension usually remains intact, but how you handle it depends on the type of pension and your plans.

How Bluestone Supports Employers with Pension Solutions

Contact us for expert guidance on pension schemes, payroll services, and HR solutions tailored to your organisation’s needs.