Pension System

Pension system in the Netherlands

The Netherlands has one of the most extensive and efficient pension systems in the world. The system is based on the principle of collective risk sharing. The Dutch pension system consists of three pillars. The first pillar is the General Old Age Pensions (AOW); the second pillar is the supplementary pension; the third pillar consists of additional pension benefits. Each of the pillars will be briefly introduced below.


First pillar: AOW

The AOW is a state-funded basic income for elderly people, who live or have lived in the Netherlands, regardless of their nationality. The AOW is paid by taxpayers, and directly distributed to people of 65 years old and over. This required age will be raised to 66 in 2018 and to 67 in 2021. After that, the required age will depend on the overall life expectancy in the Netherlands. The monthly AOW benefits depend on the net minimal income in the Netherlands and your personal situation.  The latter includes your martial status during the period you are entitled to AOW benefits and the amount of years you have contributed to the AOW system. For each year you have worked, and therefore, paid AOW contributions in the Netherlands, you are entitled to 2% of the full AOW pension.


For more information on the AOW pension system check the website of the Social Insurance Bank (SVB).


Second pillar: Occupational pension scheme

Next to the AOW pension, pensions are build up via company or sector wide commitments employers employer made with a pension fund or insurance company. These commitments include a monthly contribution of a fixed percentage of the employee’s gross income. The employer usually pays the most part of these pension contributions and is deducted from the employee’s salary. The pension funds or insurance companies are responsible for the management of the pension contributions. After retiring, pension benefits will be monthly paid out depending on the amount of money you have contributed and interest.


Check the website of the Dutch Tax Authority (De Belastingdienst) in case you want to implement a pension scheme for your employees.


More info on the occupational pension schemes can be found on the following websites:


Third pillar: Individual pension arrangement

The third pillar consists of a range of different options to individually build up extra pension. These take usually the form of insurance or saving products or investments in for example real estate. The contributor enjoys certain tax reliefs by doing so. This pillar is commonly used by self-employed or by people who want to fill up their pension gap, which can be the result of a period abroad or of unemployment.