The Dutch Pensions and Longevity Insurance Market

Ruud van Doorn and Chris Madsen

In the Netherlands the pension system consists of three pillars: the state pension; a supplementary occupational pension; and private individual pension products, similar to many other developed countries.

Figure 19.1 shows the composition of retirement income for an average retiree in the Netherlands, and it can be seen that state pension forms the largest proportion. The state pension provides a uniform pension at a level related to the minimum wage in the Netherlands. The accrual of this state pension is based only on the duration of residence in the country, although the ability exists for expats to purchase state pension benefits missed while living abroad.

Furthermore, the state pension is unfunded and financed on a “pay-as-you-go” basis: this means that today’s contributors finance the state pension payments made to the retirees of today; there is no requirement to have paid in any contribution in order to be eligible to receive the full state pension at the state pension age. In other words, “pay-as-you-go” is in stark contrast to funded initiatives, where funds are set aside for future use. In a pay-as-you-go system, the payments into the system are used to pay for

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