What is pension?

Pension is essentially the income people live on after their retirement. It is money for later. A good pension is very important. Because all of us want to be able to continue a certain standard of living after our working lives.

Pension has various forms. The Dutch system rests on three pillars and a fourth informal pillar. These are the AOW (1st pillar), the supplementary pension (2nd pillar, also known as collective) via the employer, individual pension provisions (3rd pillar, also known as annuity) and own investments or assets (4th pillar). In the following section, we explain each pillar.

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The four pension pillars

As mentioned, the Dutch pension system consists of four pillars, three official pillars and one informal pillar.

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The 1st pillar – AOW (General Old Age Pensions Act):

The AOW (the government's basic pension) is financed via a pay-as-you-go system. All Dutch citizens (working and entitled to benefits) pay an income-dependent premium with which the current AOW benefits are paid. This happens 50 years before you reach AOW age.

The AOW benefit offers a modest income to live on; the amount depends partly on the living situation (single or cohabiting) and the number of years one has lived in the Netherlands. The AOW is administered by the Sociale Verzekeringsbank (SVB) and is financed by the working generation (via premium in wage tax and supplementary funding from general resources).

Please note: There is an exception. Your AOW will be reduced by 2% for every year you have not lived or worked in the Netherlands.

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The 2e pillar – supplementary pension via the employer:

The supplementary pension is the pension that employees accrue through their employer during their careers. Such an employee pension counts as deferred salary that is "saved" during the working life. The premiums are often paid jointly by the employer and employee (often ~2/3 by the employer and ~1/3 by the employees) and paid to a pension fund or insurer. That pension provider invests the premiums and later pays out a supplementary benefit from the retirement date.

This employer's pension provides extra income on top of the AOW benefit, so that pensioners maintain their income level.

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The 3e pillar – individual pension provisions:

The individual pension provisions, also known as annuity insurance, pension investing or bank savings, are initially funded by the individual or the employer, depending on the situation. With a contribution from the employer as an alternative pension scheme. Since the decision of the Tax Authorities (KG:070:2024:1), employers can use the 3rd pillar as a pension scheme.

For self-employed persons without an employer (zzp'ers), the third pillar is of extra importance, as they do not have a second pillar – they must arrange for supplementary old-age reserve or insurance themselves in addition to the AOW

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The 4e pillar – own assets:

Own assets fall under an informal fourth pillar. Within the fourth pillar fall your own investments or possessions. These are funded by the individual and are completely at their own discretion. This is not an official pillar, but is often viewed as such because it certainly contributes to the pension. It consists of crypto, shares, real estate, art, gold bars, et cetera.

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Ultimately, the best choice depends on your situation, the sector (and any obligations), the size of your company, your budget, your philosophy as an employer, and the needs of your employees. Many SME employers who are not obliged to have a pension scheme are now seriously considering the annuity option. This way, they take good care of the long-term financial well-being of their employees.

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What Vive offers

Vive is a complete platform for pension and wealth accumulation in the 3rd pillar, tailored to SMEs. With Vive, as an employer, you help your team build wealth in an accessible way via a personal pension or investment account. Companies that previously opted out of a collective pension scheme due to high costs or complex rules now have the chance to offer a good pension. 

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How does that work - employers?

As an employer, you sponsor a pension account with Vive. This means that you, as the employer, pay the subscription costs of the pension account and the onboarding. The employer chooses who they offer it to. In addition, you can choose to contribute with a fixed amount or a periodic contribution, from any desired level. 

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How does that work - employees?

For the employee, this means a pension account in which investments are made in a fiscally advantageous manner. This creates a low-threshold financial pot for later. They also receive a nice tax rebate on their deposits every year.