Expat pensions

As a free-wheeling expat you might have already thought about how you will finance your golden years. Since you are not tied to one country, you cannot rely on your home or adopted country to finance your retirement, as periods of non-residence, and thus gaps in pension deposits could affect the amount you will be expected to live on once when you retire.

Here in the Netherlands, there are a few options to consider when thinking about retirement plans. Here we will discuss the “first pillar” of the Dutch pension system. The state AOW (Algemene Ouderdomswet) pension.

AOW
The state pension is provided to anyone who lives in the Netherlands between the ages of 15 and 65 . For someone who has lived in the Netherlands for the entire period the state scheme will entitle them to around 1,000 EUR per month (gross) if they are single, and 700 EUR per month if they are married, once they reach retirement age. This amount can vary depending on individual circumstances. The full pension is based on a person living in the Netherlands from the age of 15 to 65. i.e. 50 years. For every year which a person does not live in the Netherlands during the age of 15 and 65, this portion of the pension is lost. Or in other words, every year you live in the Netherlands between the ages of 15 and 65 entitles you to a further 2% of a full pension.

If you are an expat living in the Netherlands for a period of time, you will accumulate the state pension entitlement during that time. For example if you live in the Netherlands for 8 years, your time in the Netherlands entitles you to:

Time in the Netherlands = 8 out of 50 years = 16%
Entitlement = 1,000 x 16% = 160 EUR per month

What if I retire in my home country?
If you are planning to retire in your home country you may still be able to receive your accumulated Dutch pension, however this depends on the particular country. If you are retiring to any member state of the European Union then you will receive full entitlement to your AOW. There are also many other non-EU countries which have signed social security agreements with the Netherlands so you may be able to transfer your pension rights. However each country has a different agreement and you are advised to investigate the conditions stipulated in your particular country’s agreement. Some Dutch emigrates have received unpleasant surprises after retiring abroad.

Case study
I am a New Zealander who has been working in the Netherlands. I have accumulated an AOW pension over the last 4 years. When I retire I am entitled to about 80 EUR per month. Because NZ has a social security agreement with the Netherlands I can claim this 80 EUR as my pension. In fact by NZ law I am obliged to apply for any overseas pensions which I am entitled to. To receive NZ superannuation a time period spent overseas (of 4 years) does not reduce the amount which a person receives after retirement. Does this mean that since I lived overseas, I am actually receiving a double pension? Unfortunately no, the NZ superannuation I receive is reduced by the amount of AOW pension which I am entitled to.

Can I receive my pension in a one-off payment?
Some private pension schemes allow an individual to be paid out their pension in a one-off payment. The reason a pension provider would want to do this is to reduce the administrative burden of administering small pensions. However, with the AOW this is not legally permitted. If you are retiring in a country other than the Netherlands it is possible to request your AOW pension to be paid out quarterly or annually. 

If I retire in the Netherlands?
If you decide to retire in the Netherlands you may have a pension shortfall due to the number of years which you were not living in the Netherlands between the ages of 15 and 65. It is possible to buy back your pension entitlement through voluntary insurance with the SVB for any years which you were not living in the Netherlands, as long as you are between the ages of 15 and 65 and have been living or working in the Netherlands for less than ten years. There are online calculators which help you decide if it is favourable to do so but it is suggested that you consult an expert on the matter.

This is only one of the available options for retirement planning, in addition to company pension plans, international pension plans, annuities and more. It is important to note that this is the current status of the AOW pension and it is impossible to predict what will have changed by the time one retires.