What does the new pension agreement really mean?

Photo: Depositphotos.com
Photo: Depositphotos.com

Agreement on reforming the Dutch pension system has been 10 years in the making, and still needs fleshing out in detail – a process which is likely to take several more years at least.

Social affairs minister Wouter Koolmees has said the plan for the transition to a new pensions system should be completed by the end of 2020 and that the cabinet aims to complete the legal framework for system reform by the start of 2022.

However, there are still several hurdles to be overcome before then, starting with the vote by FNV trade union members.

Yet ministers are adamant that the deal on the table will not be tinkered with any more. ‘There is no plan B,’ said prime minister Mark Rutte on Friday.

Three pillars

The Dutch pension system is currently based on three pillars – the state pension AOW, compulsory corporate pension schemes – either sector-wide or company based – and individual or private pension schemes.

The reform talks agreed on several issues. Firstly, the state pension age will rise less quickly than originally planned, and there will be an early retirement option, aimed at people doing hard physical work.

Secondly, the reforms aim to spread the burden of paying for pensions more fairly across the generations. Corporate pensions will no longer be on based average (wage related) contributions but on everyone paying the same.


The under 40s will profit most from the decision to scrap average contributions and weaken the link between life expectancy and the state pension age – because they will have the most time to build up a full pension and their retirement date will be slightly earlier.

People in the 40s and 50s, however, will face a bigger challenge. The pension contributions they have made in the past have benefited the older generation and they are likely to be faced with less pension than expected because of the shift away from average earnings.

It is unclear at present how this shortfall will be erased, but one suggestion is that the buffers built up by pension funds could be used to plug the gap. Ministers, employers and unions have agreed to create a dedicated steering group to work out how the current average pensions accrual method will be replaced.

Early retirement

People in their 60s will benefit most from the changes and will be able to retire up to three years early without it costing their employers too much in fines for lost premium and tax income.

The agreement will also make it easier for freelancers and the self-employed to join a pension fund in the sector they work in, experts say.

However, they will also have to take out invalidity insurance to replace income if they become unable to work through ill health.


The details of how that will work still have to be thrashed out and freelancer lobby groups are furious at the idea.

The government has said the plan should not cost the treasury any money, but has also indicated that the insurance should be administered by a public sector body.

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