What kind of pension should I arrange if I live in the Netherlands as an expat?

As an expat in the Netherlands, the topic of pensions will be on your radar at some point. But what do you have to arrange and what are you entitled to? In this article you will get a global overview of your possibilities as an expat in the Netherlands.


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The Dutch AOW

The “General Old Age Pension Act” (Algemene Ouderdomswet – AOW) regulates a government-funded piece of income that people are entitled to when they meet certain conditions. Even as an expat, you are sometimes entitled to the accrual of AOW under certain conditions.

A number of conditions are that you officially live in the Netherlands and are between 17 and 67 years old. The maximum number of years that AOW can be accrued is 50 years for everyone.

For expats – and the partner of the expat – it is important that you really emigrate. You no longer have a home abroad, no work and no more possessions. The intention with which you come to the Netherlands is to live and work here for a longer period of time. You (or your partner) are employed here and payroll taxes are paid. In some cases, a one-year stay is sufficient, in other cases the lower limit is three years.

And in all this, there may be no question of a secondment contract (“detachering”). The situation differs per country and per contract and it is always smart to call the SVB to ask whether the right to AOW applies https://www.svb.nl/en/.

Suppose that at the moment the AOW age is 67 years and you and your partner come to live and work here when you are 48 years old, then your AOW accrual is a maximum of 19 years. The future AOW benefit is then proportional to the accrual and in this case 19/50 of a full AOW.  You can voluntarily take out additional insurance for the AOW. The SVB can inform you about this.

Pension with an employer

When you accrue pension with an employer, your own contribution is deducted from your gross income every month. Your employer also adds a part so that the build-up goes faster than if you would do this alone. No income tax is now levied on your pension accrual with an employer. Your future pension benefit is indeed taxed with income tax (Box 1). But that is probably at a lower tax rate than you currently pay in paid employment.

Do you want to know what your future pension is likely to look like? On the website https://www.mijnpensioenoverzicht.nl you can see what you are entitled to in the future. Your AOW pension is also mentioned here and the website can also be read in English.

Pension under own management

You can also save for your pension yourself. This is called saving in Box 3 and that means that you completely decide for yourself what you do with the money, and when. You do pay some tax on the return above a certain amount. Above an amount of EUR 57,000 per person (guideline 2023) you will pay tax on the return. The way this is calculated is changing. Until 2025, a fictitious return is still expected.  From 2026, the tax authorities must take into account the real return.  For tax partners, the double exemption applies, namely EUR 114,000.

The rate for the wealth tax will be increased annually to 34% in 2025 on the notional return. However, the way in which your assets are divided between debts, savings and investments is taken into account. You therefore pay the rate on the (fictitious or real) return and not on your original capital.

But how are you going to arrange that pension in the Netherlands yourself?

In short: you can start saving and / or investing. And you can do this in-house, but you can also buy a pension product such as capital insurance or an annuity insurance.

When you start to build up wealth, it is always smart to take your horizon into account. In other words; how long will it take until you want to retire? Rule of thumb; with a long horizon, for example more than 10 years, you can consider taking a little more risk. By the time your retirement is near (and your horizon is shortening considerably) your risky investments should be exchanged for low risk investments.

But what is at least as important is your own attitude towards risk. How do you feel when the value of everything you’re building suddenly decreases 20% or more?

The possibilities are (according to increasing risk and therefore also potentially higher return):

  1. Liquidity – > This is money that is immediately available such as money in your account and savings.
  2. Bonds -> A bond is slightly riskier. Inshort, you lend your money to a company or the government and you receive interest. Over time, your loan expires and you normally get your deposit back.
  3. Real estate -> Everything that has to do with investing in homes and business premises. This can be done in many ways and has more risk. The chance of a higher return also increases.
  4. Shares – > when you buy shares you usually receive dividends. This is a piece of compensation for your investment and trust in the company. There are an incredible number of possibilities (just like with the other 5 categories mentioned). For example, you can invest in index funds. These are baskets of shares so that you automatically have more spread than with a number of self-purchased shares.
  5. Derivatives -> These are derivatives of real assets as described above. A derivative is a derivative product such as an option or future. The value can increase or decrease very quickly and has to do with time and expectation value. These are speculative products.
  6. Crypto > cryptocurrencies such as Bitcoin, Ethereum and Cardano are highly speculative and can rise and fall in value very quickly.

A good investment portfolio therefore contains all six components described above. Of course, a book can be written about each of these possibilities and the explanation here is very brief.  But with every build-up, how much time do you have and how much risk suits you?

Buying a pension product

There are many providers of pension products. Without making a list, I mention a possibility here (this is not an affiliate link):  https://new.brandnewday.nl/bnd-voor-expats/

In my opinion, Brand New Day is a sympathetic party for building up a pension pot.

There are many parties and many possibilities in the Netherlands. When you choose an annuity policy or a capital insurance, you must adhere to the rules of the government.  Usually these policies run for years and in between everything (like legislation) can change. That ensures that you have to ask yourself very well whether something like this suits you. Because who says that you will still live in the Netherlands in, for example, 5 or 7 or 13 years… Being able to buy off, stop or take your self-purchased policy is then of great importance, just like the tax rules.

Always do your own homework

This article is nothing more than a rough outline of information. Regulations, rules and taxes change all the time. Make sure your inform yourself well about investment possibilities and risk. Every products has is own unique pro’s and cons. So make sure you know the details before you sign any contract and contact the SVB and the Belastingdienst to know more about your own unique situation.