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.
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)
- savings or investments
- reserve part of your annual profits as a retirement reserve
- sell your company and convert the discontinuation profit to tax free annuity
- 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
- invest in property
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).