The Netherlands is one of the greatest countries in the world for retirees, with a strong and durable pension system that gives the senior population of the nation a comfortable income.

Approximately 30% of Dutch citizens are over the age of 65 (currently transitioning to 67), which is higher than the average of 28% for the 37 OECD nations. The worldwide average life expectancy is 81 compared to 82 in the Netherlands.

The Melbourne Mercer Global Pension Index often recognizes the Netherlands as having one of the best pension systems in the world. This high rating is attributable to the Dutch pension system’s diverse financing sources, precision in calculating costs and contributions to guarantee equitable distribution, and stringent supervision by the Dutch Authority for the Financial Markets and the Dutch Central Bank.

The Dutch pension system combines a pay-as-you-go structure and an individual investment strategy to attain these high ratings. Pay-as-you-go refers to the ongoing contributions that employees make to the pension system for the benefit of current retirees.

The State Pension (also known as Old Age Pension, AOW), Collective Pension, and Individual Private Pension are the three main pillars of pension investments in the Netherlands.

AOW Pension

The maximum amount that the state pension (AOW) will pay out upon retirement is only worth 70% of the most recent salary received because it is the most basic pension plan. The majority of employees won’t be eligible to get this maximum amount. Because of this, businesses in the Netherlands offer collective pension as an addition to this state pension. In the Netherlands, a collective pension scheme is provided by over 90% of businesses, and many employees look forward to this supplementary fund.

Collective Pension

The collective pension scheme is an optional benefit that employers can provide to their employees as an addition to the state pension (which all workers in the Netherlands contribute towards for the duration of their residency in the country). However, some business sectors might also demand that employers offer particular collective pension funds.

A collective pension is a retirement plan that has been agreed upon by both employers and employees and is administered by outside pension funds and insurance companies. Employers can select from a variety of collective pension funds.

Pension fund by industry

A firm pension fund or an industry-wide pension fund must be joined by businesses in areas like construction or manufacturing (Bedrijfstakpensioenfonds, Bpf). Employers are required to include all of their workforce, including contractors and independent contractors, in the sector pension fund.

1. Fund for occupational pensions

Specific pension funds are needed for some occupational groupings, including notaries, employees in the healthcare, pharmaceutical, and maritime industries, among others. As a result, you must take part in occupational pension plans if your business operates in one of these areas.

2. Pension Plan of ABP

Institutions in the public sector, including those in education, must have an ABP pension fund.

Optional Pension

Employers may elect voluntarily to join a collective pension fund for enterprises that do not meet the requirements of the mandatory collective pension systems. A “generic pension” fund is another name for this one. The corporation has the option of giving perks other than pension to its employees that are equivalent in value to pension. For instance, if an employee is already contributing to their spouse’s pension and is not interested in joining the business’s collective pension plan, the company may be better served providing this person with an alternative benefit.

Individual Private Pension

The individual pension products or supplements are the third component of the Dutch pension system. The majority of people who utilize these supplements are workers and self-employed people who work in sectors without public pension plans. Individuals may individually purchase and manage pension products or assets like life insurance, stocks, or real estate while also benefiting from associated tax savings.

How to set up your pension plan

Employers in the Netherlands should anticipate requests and inquiries regarding pensions. Setting up a pension plan for employees is a procedure that many multinational corporations find to be rather challenging. In order to assist you with the project’s preparation stage, we would like to draw your attention to a few topics.

Step 1: Verify your collective labor agreement (CLA), or CAO (in Dutch) if applicable. The CAO or CLA a collective labor agreement that outlines specific employment terms. It’s probable that there is a contract that must be followed in your industry. The document will specify if you are required to give a specific kind of pension, as we have previously listed. You might also look it up here if you’re interested in finding out more about it but aren’t yet in the Netherlands (in Dutch).

Step 2: You must understand your employees’ demographics in order to choose the collective pension that is best for your company. Your employees’ attitudes toward retirement may be revealed by their age, gender, way of life, and even nationality. Employees who are married and have families, for instance, might prefer a pension plan that allows them to include their spouse or kids in the plan. Workers with non-European nationalities also frequently encounter difficulties transferring their pension to their home country. You might need to take into account a pension plan that is more flexible than what is typically offered if your company employs expats.

Step 3: Pensions could be an instrument for luring and keeping talent. Employers should constantly consider new strategies to motivate staff members and maintain a competitive edge in the labor market. Check out what rivals are providing their employees in the branch market for the sector pension. By setting a higher bar for employee salary, you’ll probably be better able to draw in top talent and keep your current workforce.