Detailed explanation of Dutch pension system

The high standard of living, good medical care and high quality of life in the Netherlands have attracted many foreigners to receive pensions after retirement. The key to comfortable retirement is to plan ahead, and more importantly, to make full preparations for retirement abroad.

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Dutch pension system

Who is eligible for a pension in Holland?

Pensions for foreigners in the Netherlands

Dutch pension rates and contributions

Other pensions in the Netherlands

Dutch pension system

The Netherlands is one of the most suitable places for retirees in the world, with a strong and sustainable pension system, which provides considerable income for the elderly population in the country.

According to health, finance, quality of life and material welfare, the Netherlands ranks fifth in the Nataxis 2020 global retirement index, rising from 20 19 10. The Dutch pension system ranks first in Mercer's global pension index in 2020, and it is highly evaluated in terms of adequacy, sustainability and integrity.

The Dutch pension system has three pillars: state pension, workplace pension and private pension. Sociale Verzekeringsbank (SVB) manages the state pension according to the provisions of the General Pension Law (AOW). National pension is usually called AOW.

Dutch pension funds held assets of/kloc-0.7 trillion US dollars in 20 19, second only to the United States, Britain and Australia. The total assets of pension funds account for 19 1% of GDP, exceeding any other OECD country.

Who is eligible for a pension in Holland?

Age of pension in the Netherlands

In 2020, the national pension age in the Netherlands is 66 years and 4 months, rising from 65 years in 20 18 to 67 years in 2024.

The date when you receive a Dutch pension depends on your birth time. SVB provides Dutch pension age calculator to find your personal retirement age.

You can retire early in the Netherlands, but you usually need to raise funds yourself, because you won't get the full state pension until you reach the official pension age in the Netherlands. If you meet the requirements of SVB, you may also be eligible for transitional benefits (vergelijkbare uitkering or VUT). If you like, you can also work after the standard retirement age to build a bigger pension.

Who can apply for a national pension in the Netherlands?

Every year you live or work in the Netherlands, your national pension will increase by 2%. To get a full pension (100%), you must have paid contributions for 50 years. If it is not paid in full, your pension will be calculated according to the number of years you have paid.

If you move outside the Netherlands, this may reduce your pension amount /65438+ individuals between the ages of 05 and 65. If they don't live in the Netherlands, they may lose 2% of their Dutch pension every year.

In some cases, foreigners working abroad can still benefit from the Dutch pension system. For example, some foreigners choose to participate in the national endowment insurance voluntarily within 12 months after emigration.

What if you are not eligible for a full pension?

If you are not eligible for full AOW pension, you can still apply for AIO subsidy.

AIO is a supplement, which can make your income reach the level of guaranteed minimum income in the Netherlands. To qualify, you need to reach retirement age, live in the Netherlands, not receive a full state pension and have little or no other income or assets.

For residents living alone, the maximum AIO subsidy in 2020 is 65,438+0,250.05 euros per month. If you live with your partner and you both need AIO subsidy, you can get a total of 1, 526.54 euros per month. If your partner doesn't need subsidies, you can get up to 763.27 euros a month.

Pensions for foreigners in the Netherlands

The Netherlands is a member of the European Union (EU) and the Schengen area. This means that citizens from the European Union, the European Economic Area (EEA) or Switzerland can legally live, work and retire without a visa.

Citizens of non-EU countries usually need a Dutch visa. After living in the Netherlands for five consecutive years, you will be able to apply for a permanent residence permit.

Transfer your pension to Holland.

EU/EEA and Swiss nationals can incorporate their national pensions obtained in other member States into their Dutch pensions. You can inform the pension office in the country where you currently live. Then, it will calculate the proportional pension allowance for each country. The EU has provided an explanation on its website.

The Netherlands has signed various bilateral social security agreements with other countries, allowing foreign citizens to transfer international pension funds to the Netherlands for retirement.

These agreements reduce the tax impact of transferring pension funds, such as double taxation (you must pay taxes in your country of residence and nationality).

If you live outside the Netherlands, some nationals can transfer their Dutch pensions abroad; You can also use SVB tools to check whether the country/region where you live can do this. In some cases, residents who move out of the Netherlands can apply for immigration benefits to cover their monthly living expenses.

Dutch pension rates and contributions

Three pillars of Dutch pension system:

The Dutch National Pension (AOW) is the first pillar. All residents pay taxes and social security.

Occupational/enterprise pensions funded by employers and employees constitute the second pillar.

Private pension plans (annuities) funded by individual voluntary contributions constitute the third pillar.

Your Dutch pension fund is calculated based on your social security contributions, employers' and employees' occupational pension contributions and optional private pension plans (if applicable).

Dutch national pension

Dutch state pension is provided by workers, accounting for 17.9% of wages.

In 2020, single pensioners who are entitled to a full state pension will receive a total of 65,438+0,270.67 euros (70% of the minimum net wage), while married or cohabiting couples will receive 870.03 euros (50% of the minimum net wage).

This amount does not include health insurance contributions of 69. 19 euros (single person) or 47.4 1 euro (husband and wife), and 246.25 euros (single person) or 169.92 euros (husband and wife) (if tax exemption is not applicable). It also provides an extra holiday allowance of 69./kloc-0.9 euros per month (or 49.42 euros for couples).

The total pension income in the Netherlands is taxable. Some pensioners must also pay national insurance, while everyone must pay medical insurance premiums. Pensioners can get preferential tax rates, and the amount you pay will depend on your personal situation.

Workplace pensions in the Netherlands

About 90% of employers offer occupational pension plans, which are usually handled by external pension providers. Some occupations have compulsory plans. For example, people who work in education or government departments need ABP pension funds.

Therefore, the labor-based pension is a supplement to AOW. In addition to pensions, private pension plans can also provide benefits for surviving relatives or when you are unable to work.

The company pension takes into account the AOW pension, so you don't have to pay for your full salary, but it is deducted by AOW. The rate depends on the pension plan you signed.

The most common occupational pension plan is based on the average wage accumulated by workers in their career. These plans almost completely replace the final salary plan.

Employees' pensions must be held outside the employer's company, whether in Dutch pension funds, company plans or industry-wide career plans, or by life insurance companies. If the employer goes bankrupt, this can protect the rights of workers.

Private pensions in the Netherlands

Another way to supplement pensions is to make voluntary contributions to private pension funds. Major banks and insurance companies usually provide private pensions.

Private pensions are very popular with self-employed people and people who work in departments without collective plans. They are also useful for workers who want to supplement the state and workplace pensions through extra investment.

Contributions to private pension funds are usually tax-free, but future pension benefits will be taxed.

Other pensions in the Netherlands

Survivor's pension

If your partner dies, you may have the right to use their Dutch pension fund, but you must meet some conditions. For example, if you are not old enough to receive a state pension, you must have a child under the age of 18 or have at least 45% disability. These benefits also apply to children aged 265-438 and under whose parents have died.