This is part 2 of a series of whitepapers from BUREN. In this series BUREN each time highlights a basic facet of Dutch employment law. This second part examines the Dutch pension system.
The Dutch pension system is a so-called “three-pillar” system and consists of the following: (i) state pension, (ii) supplementary collective pension and (iii) individual arrangements.
The AOW is the state pension. Under the General Old Age Pensions Act (in Dutch: Algemene Ouderdomswet, in short: AOW), all persons living or working in the Netherlands are in principle automatically insured under the AOW scheme, and accrue pension rights annually.
Persons in the Netherlands receive AOW pension from the day they reach their pension age. Since 2012 the pension age increases from 65 to 67 in 2021, and is currently 66 years and 4 months. Recently, Dutch employers, unions and the government agreed upon a pension agreement (in Dutch: Pensioen akkoord) based on which (i) the current pension age is to be fixed for two years (2020 and 2021), (ii) the increase of the pension age will slow down by three years, to reach 67 in 2024 and (iii) the pension age after 2024 is to be increased by eight months for every year of extra life expectancy. The pension agreement must be approved by the Dutch Senate (in Dutch: Eerste Kamer), after which it is expected that this new legislation will enter into force as per 1 January 2020.
Please be informed that the AOW pension is just a modest amount of pension. Therefore, AOW pension usually forms a basic pension only.
2. Supplementary collective pension
In addition to AOW pension, it is common for employees to participate in a pension scheme during their years of employment.
In principle, employers are not under any obligation to provide pension schemes for their employees, except in the following cases:
Please note that, irrespective of whether the employer provides a pension scheme, the employer must inform the employees within one month after they commence employment whether or not they can participate in a pension scheme. It is customary to include this in the employment contract.
Typically, collective pension schemes are arranged between employers, employees and independent external pension funds (‘triangular relationship’). The legal basis of collective pension schemes consists of a pension agreement (in Dutch: pensioenovereenkomst) in which employers and employees agree on the conditions of the pension. The pension agreement is commonly included in individual employment contracts or in the CLA. Employers delegate the execution of pension agreements to pension providers.
Arrangements between employers and pension providers about the execution of pension plans (premium contribution, indexation, etcetera) are included in administration agreements (in Dutch: uitvoeringsovereenkomst). Relationships between pension providers and employees are governed by the pension scheme rules (in Dutch: pensioenreglement), which are determined by the provisions in the pension agreements and the administration agreements. The pension scheme rules lay down the individual pension rights and pension obligations of employees with regard to the respective pension fund.
Furthermore, Dutch law in general provides for two types of pension schemes:
3. Private individual pension
In addition to the abovementioned two pillars under the Dutch pension system, employees can individually and voluntarily arrange for additional pension schemes (e.g. annuity insurance, life insurance).
Download this whitepaper
This whitepaper is also available in PDF format:
BUREN Basics Part 1 | Types of contracts under Dutch law
Also read the first part of the series. This part examines the different types of employment contracts under Dutch law.
This is part 3 of a series of whitepapers from BUREN. This third part
In less than two weeks, on 1 January 2020, the Balanced Labour Market Act (In Dutch: Wet Arbeidsmarkt in Balans, ‘WAB’)
On the 25th of April we were honored and proud to have welcomed a delegation of the Ministry of Justice headed