The Dutch pension system
APG manages the pension assets of around 4.5 million Dutch citizens for its clients. We perform a responsible task for one in every five families. APG firmly believes that participants benefit from a collective pension system. We support this pension system with our knowledge and expertise.
The Dutch pension system is based on three pillars. The first pillar is AOW state pension; the second pillar is provided by the pension funds. Participation in a pension fund is mandatory to everyone who works. The third pillar consists of supplementary insurance policies.
We concur with our clients: we as a pension provider believe in a strong Dutch pension system based on collectivism and solidarity. Every Dutch person is entitled to AOW (basic state pension) from age 65 based on the number of years he/she resided in the Netherlands. From 2013, the age at which people become eligible for AOW state pension gradually increases. In 2021, this will be age 67. The basic state pension is funded through a current income financing system; an annual calculation determines how much cash is needed in total, and this is distributed among all contribution payers. The basic state pension (the first pillar) is based on solidarity of virtually the entire population because it concerns a general legal facility funded by a very large portion of the population. These two aspects together make for a redistribution system referred to as solidarity.
Pension schemes constitute the second pillar. Participation in a scheme is mandatory for every person who works if a CLA with a pension scheme is applicable. The second pillar of the Dutch pension system is based on solidarity. This solidarity takes the shape of collective pension schemes. These schemes are generally provided by sector-wide, corporate or profession-based pension funds, or by insurers or PPI’s (Premium Pension Institution).
It is important to keep participation mandatory. This way, pension savings are mandatory for the entire working population, with the exception of ZZP (self-employed individuals). Retirement plans are not mandatory in the Netherlands, which is why self-employed people are free in their choice. We are convinced that a future-ready pension system must also be based on a socially and economically strong second pillar.
The supplementary insurance policies fall under the scope of the third pillar. Both employers and employees are increasingly responsible for the level of income when changes take place, such as pre-pension (part-time retirement), disability or death. This also includes the individual pension products for the self-employed and bank savings accounts. This has resulted in increasing demand for options to individually supplement collective and semi-collective schemes.