EU threatens the Netherlands with a process to protect the pension system

The Netherlands must quickly do something about regulations that make it difficult for citizens to transfer their pensions abroad or to purchase pension products from a foreign provider. The European Commission threatens with the European Court of Justice if the legislation is not amended within two months.

The Dutch pension system has already been the subject of discussion between EU and the Netherlands, mainly because the Dutch system does not fit in with the EU approach to pensions in many respects. Unlike all other EU countries, pensions are not some kind of 'social security' organized by the government, but the pension funds are owned by employers and trade unions.

In the Netherlands, the pension is not paid out of tax money (which is collected and paid out via the government), but through premiums that are deducted by employers from wages. This means that pension payments in the Netherlands are not 'tax or social benefits', but 'deferred wages'.

In addition, in the other EU countries, tax levies and tax payments are set annually by changing governments, which leads to a fuss about pension amounts almost every year, such as in France or Greece. In the Netherlands, the amount of the premium and the benefit is set 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 approach of the European Union, pensions are only financial transactions, which should therefore also apply across borders across Europe.

In such a neo-liberal market approach, a Dutch person should be able to take out pension insurance in France, and vice versa. But a Frenchman cannot become a member of a Dutch pension fund; then he would have to be employed by a Dutch company in that sector. In short: to what extent can the Netherlands protect its social pension system, or: how do others get control over our pensions?

The European Commission has already warned the Dutch government about the issue. For example, the Dutch Ministry of Finance requires (bank) guarantees from an (former) employee if his pension capital is transferred to a foreign pension fund. This is due to possible tax conflicts about the pension agreement. There are also conditions that prevent them from offering their services on the Dutch market for foreign pension providers. Brussels doesn't like that either.

Earlier this year, the Rutte cabinet reached an agreement with employers and trade unions and the Lower House on a radical modernization of the pension system. In it, employers mainly look at the level of premiums to be paid, the trade unions mainly look at the level of benefits, and the government focuses on legal feasibility and feasibility.

In recent months it has again become apparent that Minister Wouter Koolmees (Social Affairs) is feeling the hot breath of EU: the new Dutch pension system must also fit within the EU rules as far as Brussels is concerned. This is even referred to as a 'transfer union' whereby the saved pension pots from all EU countries would come in one pot, and all pensions from that one pot would have to be paid.

Despite possible impending discounts, the Dutch pension system has recently been named the best in the world again. Just like last year, consultancy firm Mercer placed the Netherlands at the top in its Global Pensions Index. Although many Dutch people are grumbling about the uncertainty of their pension benefits, it is sometimes good to realize through investigations that the Netherlands is doing very well worldwide, one of the researchers said.

Denmark was slightly higher in 2017. That country is now in second place and after the Netherlands the only other country to receive an 'A' rating for the degree of financial stability that the system offers after retirement. Australia came third, followed by the Scandinavian countries Finland, Sweden and Norway.

The Dutch pension system scores high in the area of adequacy, sustainability and integrity. That led to a total of 81 out of 100 points, 0.7 points more than last year. There is room for improvement in the area of household debts, which are relatively high. Households in Denmark also have a relatively large number of debts, of which mortgage debts are the main part.