Questions about your pension? Ask Patrick Donders from EPH

Pensions Matter

Pensions matter for your old age and risk coverage. Following are several basic aspects to point you in the right direction.

International Expat Pension Coverage

  • Coverages can be created by the company or by the expat
  • The pension plan might relocate with the expat to each new country or it might have to stay in one country.
  • The coverage might be legally covered as a “pension” or as “insurance”.

Basic Dutch Pension System

Pensions are covered by means of three pillars:

  • Pillar 1: Governmental coverage for residents
  • Pillar 2: Corporate coverage for employees
  • Pillar 3: Private coverage by individuals

We will as of now only focus on corporate coverage.

Corporate Coverages

There are only three kinds of pension coverages allowed in Holland:

  • Old Age Pension
  • Next of Kin Pension
  • Disability Pension

In case it’s not possible to get the required coverage by means of a “pension”, it might be possible by means of an “insurance”.

DC/DB/Hybrid Pension Plans

  1. Defined Benefit (DB) pension plans provide a guaranteed amount of pension terms at pension age. There is neither investment nor interest rate risk, which makes these plans extremely expensive and old-fashioned, due to the historically low-interest
  2. Defined Contribution (DC) pension plans provide a guaranteed amount of pension premium. At pension age, a lifelong annuity has to be bought along with the acquired total pension capital. There are no guaranteed pension terms, however, there is a substantial amount of investment and interest rate risk. Most plans today have a DC
  3. Hybrid pension plans have elements of DB and DC pension plans. A familiar version is that the old age pension is DC based and the risk coverage DB based. Be careful what the exact nature is of a hybrid

PPI as DC Alternative 

Due to the historically low-interest rates, DB pension plans have become extremely expensive. For this reason, many companies have a DC pension plan. As of 2011, it is also possible to choose a Premium Pension Institution (PPI).

Generally speaking, a PPI has substantially lower costs, more flexibility and more choices than an insured DC pension plan. Thus, you should also look at the PPI possibilities for covering your expat pension plan.

Legal Limitations

When formulating your wishes and the plan for your pension, pay attention to the following Dutch restrictions:

  • The maximum amount of corporate-related pension wages in 2018 amounts to € 075,-.
  • Pension wages have to be decreased with a 2018 franchise of i.e. minimum € 344,-.
  • In the Netherlands, product-related pension advice may only be provided by an AFM- licensed pension consultant. They must be independent from insurance companies and may only receive payment from their

International Transfer of Pensions

In theory, it is possible to transfer pension capital from one country to the next. However, each country has its own legal and tax regime and Dutch legislation is rather strict.

Transfer from Holland

A transfer of pension capital from a Dutch pension plan to another country is only possible if the pension plan in the next country has the same elaborate requirements as the Dutch pension plan; i.e. that its old age pension funding is capital based, that the capital is placed in a separate legal entity outside of the sponsoring company and that there will be no lump sum payout, only annuities.

Due to these requirements, the transfer is often not allowed.

Transfer to Holland

Transferring pension capital to a Dutch pension plan from another country is generally less difficult. However, it is still advisable to carefully look at all requirements beforehand.

Pan-European Pension Plan (PEPP)

The EU is working on the creation of a Pan-European Pension Plan (PEPP). One of the benefits of this proposed scheme is that it will be transferable across EU member states.

So far, expats do not yet have the possibility to acquire a work-related individual PEPP. The

existing PEPP’s are collective and there aren’t many.

Of course, it is a welcome initiative from the European Commission to offer a proposal for a kind of PEPP where the 3rd Pillar is the private sphere and not the work-related 2nd Pillar. If individual countries provide tax benefits, it may be an alternative in a situation where there are no Pillar 2 alternatives. But with pensions, low costs and the benefit of scale, and therefore collective coverage, really do count.

It would be great for expats if an individual PEPP for the work-related Pillar 2 is created, with low costs and cost sharing. This is not easy to realize, of course, but it’s good to have a target and solution in mind!

Conclusion

It is relevant that expats have a tailor-made pension plan for the right coverage at the lowest cost. Feel free to contact Expat Pension Holland for advice.

We provide high quality pension consultancy for expats. We translate complex issues into simple solutions. Thus to create the highest value for our expat clients. As we have done for 20 years on 5 continents. And which we will gladly do for your family!

Recommendations

If you would like to know how several clients have perceived our services:

  • ‘It was a great experience and eyeopener to work with Patrick. He provided essential insights.’ Gabor Purman, Director, Teva Pharma/ London
  • ‘I was very pleased with Patrick’s services. He is highly professional and dedicated.’ P.B., Global Assurance, European Space Agency
  • ‘I would highly recommend Patrick to any expat with any type of pension ‘

Gary Atkins, Director, Murata Electronics Europe BV

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