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Pension in the Netherlands


In Netherlands, there is a public pension plan for when you retire, but an extra contribution to the pension scheme of your industry is required. However, that pension scheme is a bit particular:

  • unlike other countries, you cannot decide in what to invest or how to invest.
  • you don’t get back the money that you put in it when you retire, but a given amount of yearly contribution.
  • when the pensioned deceases, the pension is not inherited by the surviving relatives.

These details puzzled me a lot initially, until I understood that it is not a savings retirement account, but an insurance: You pay a monthly fee to ensure receiving money until decease.

Attention! The values have been updated to 2020.

Pension amount

The Dutch government provides the AOW pension, which in 2019 corresponds to a net amount of 13899€/year to a single individual (2x 9548‬€/year to partners). According to the SVB, you need to live and work in Netherlands to get the AOW. Same source specifies that each year that you are insured it counts for 2% of that AOW. In other words, you should be in Netherlands for 50 years to get full AOW. You could still build up your AOW from abroad with a voluntary AOW insurance. Beware that if you live but you don’t work or you work but you don’t live in Netherlands the rules may be different… better to check it out with the SVB itself.

If you move to Netherlands when you are 40 years old, your maximum contribution will be less than 30 years, so your maximum AOW will be 8339€ a year.

With that absurdly low amount there is need of something more. There is where the industry pension scheme kicks in. Each year that you work, you also contribute to the industry pension. Year by year you raise your pensionable amount towards your retirement. When you retire, you get that yearly amount, without time limit. (Recall the insurance aspect of it).

You can find information about metalektro pension in their page.

If you want to automatically calculate your pension, use the calculators page. However, if you want to understand how they values are calculated, keep on reading.

Industry Pension Contribution: the cost of the pension

The total contribution made each year to the pension is 23% of your pensionable salary, however, companies are obliged to contribute in a certain amount. The metalektro sector for instance is set in a way that you have to contribute a maximum of 11%.

The pensionable salary is calculated as your gross salary minus the pensionable exempt (CFT). Remember that if you have the 30% Tax Ruling, your gross should be reduced by 30%. You can see the numbers here.

The ‘pensionable exempt value’ for 2020 is 14.554€. Beware that there is also a maximum pensionable salary of 110.111€, above which there is no pension accrual. And a much lower ‘basic salary limit’ of 78.348€. (I am not sure what is the difference, I have to check that one out!)

Industry Pension Accrual: the return of the pension

The yearly pension return is specified by the accrual and the amount of years that we have contributed.

The accrual of the pension is 1.875% of the pensionable salary, and it is stacked up yearly.

  • 10 years contribution bring 19% of the pensionable salary,
  • 30 year contributions bring 56% of the pensionable salary.
  • Per year, until decease.

To make it clearer, let’s go with a practical example.

Practical example (2018)

You just moved to Netherlands, you are 48, and you are paid 60.000€ with tax ruling, which corresponds to 42.000€ gross a year. Discounting the 14.705€ CFT, that is a pensionable salary of 27.295€.

The contribution to that industry plan is 23%, or 6.278€ each year. However, you are lucky and your employer contributes 20%, so you only have to contribute 3%, or 819€.

That is calculated monthly, so in each payslip you have a deduction of 68.25€.

After 20 years you retire. Your total accrual is 20 x 1.875% x 27.295€, which means 10.236€/year from your industry pension, and 20 x 2% x 14.937€=5975€ from the AOW. That means a total of 16211€/year of perpetual income.

Note that the example has been simplified, as during the 20year period the salary would have been raised, and the tax ruling would have expired. Those higher gross salaries would also lead to higher contributions and higher accruals.

Disclaimer

  • Although these values have been calculated to the best knowledge, they are not guaranteed.
  • If you want to make sure values are correct, contact with SVB and/or your industry pension fund.

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