The Netherlands must quickly address regulations that make it difficult for citizens to place their pensions abroad or to purchase pension products from a foreign provider. The European Commission is threatening to take the case to the European Court of Justice if the legislation is not amended within two months.
The Dutch pension system had already been a subject of discussion between the EU and the Netherlands, mainly because the Dutch system does not conform to the EU’s approach to pensions on many points. Unlike all other EU countries, pensions are not some form of government-organized 'social security', but the pension funds are owned by employers and trade unions.
In the Netherlands, pensions are also not paid from tax money (collected and distributed by the government) but from contributions withheld by employers from wages. Thus, pension payments in the Netherlands are not 'tax or social benefits', but 'deferred wages'.
Moreover, in other EU countries taxes and tax benefits are set annually by changing governments, which almost annually leads to controversy over pension amounts, as seen in France or Greece. In the Netherlands, the contribution levels and the benefit amounts are determined by employers and trade unions, outside of political decision-making.
According to the European Commission, the Netherlands hinders the free movement of citizens and workers, the freedom of establishment, the freedom to provide services, and the free movement of capital. In the EU’s approach, pensions are merely financial transactions, which should therefore also apply cross-border throughout Europe.
In such a neoliberal market approach, a Dutch citizen should be able to take out a pension insurance in France, and vice versa. But a French citizen cannot become a member of a Dutch pension fund; they would have to be employed in that sector by a Dutch company. In short: to what extent may the Netherlands shield its social pension system, or: how do others gain influence over our pensions?
The European Commission has previously issued a warning to the Dutch government about this issue. For example, the Dutch Ministry of Finance requires (bank) guarantees from a (former) employee when their pension capital is transferred to a foreign pension fund. This is related to potential tax conflicts concerning the pension agreement. Foreign pension providers also face conditions that hinder them from offering their services in the Dutch market. Brussels is also uncomfortable with this.
Earlier this year, the Rutte cabinet reached an agreement with employers, trade unions, and the House of Representatives on a comprehensive modernization of the pension system. Employers primarily focus on the level of contributions to be paid, trade unions on the level of benefits, and the government on the legal feasibility and implementability.
In recent months it has become apparent once again that Minister Wouter Koolmees (Social Affairs) feels the EU’s pressure: the new Dutch pension system must, according to Brussels, also comply with EU regulations. There is even talk of a 'transfer union' in which the pension pots saved by all EU countries would be pooled into one pot, and all pensions would need to be paid from that single pot.
Despite potential looming cuts, the Dutch pension system was recently named the best in the world again. Consulting firm Mercer ranked the Netherlands at the top of its Global Pensions Index, just like last year. Although many Dutch people complain about the uncertainty of their pension benefits, it is sometimes good to realize through such studies that the Netherlands is doing very well globally, said one of the researchers.
In 2017, Denmark was ranked just above. That country is now second and, after the Netherlands, is the only other country to receive an 'A' rating for the financial stability the system offers after retirement. Australia came third, followed by the Scandinavian countries Finland, Sweden, and Norway.
The Dutch pension system scores highly on adequacy, sustainability, and integrity. This resulted in a total of 81 out of 100 points, 0.7 points higher than last year. Room for improvement exists in household debt levels, which are relatively high. Households in Denmark also have relatively high debts, mainly mortgage debts.