1.7 million in Dutch workforce not linked to pension, raising retirement fears

About 1.7 million Netherlands residents received an income from work in 2020 but did not contribute to a pension fund. A large part of this group also does not make up for that with other pension savings, De Nederlandsche Bank (DNB) reported based on research into Statistics Netherlands (CBS) data on pension accrual.

Employees who do not accrue pensions are more often people under the age of 40, women, and people with roots outside the Netherlands. Employees with flexible contracts and employees at small companies are also less likely to build up an old-age provision. According to DNB, these characteristics have hardy changed between 2016 and 2020.

Self-employed persons who accrue pensions almost exclusively work in sectors where contributing to a pension fund is mandatory. It hardly happens in any other sector. In most sectors, that means that only 2 to 4 percent of self-employed set aside money for old age. Self-employed people with a higher income are more likely to do this.

Most self-employed people who don’t accrue pensions in a given year do not do so in later years either. Of the self-employed people who didn’t build up a pension in the first researched year, 92 percent still did not do so five years later. The group of employees who do accrue pension is also very constant. That, plus the fact that other workers do not compensate for lagging accrual in other years, leads to a very unequal distribution of pension accrual.

Workers who don’t accrue pension also build up minimal capital in other forms of pension savings, such as through life insurance. Total assets also hardly compensate for the lack of pension accrual. These assets include things like owner-occupied homes, business capital, and financial capital, including savings.

The DNB, therefore, sees a risk that this group of employed and self-employed people will experience a sharp drop in income after retirement and will run into financial problems as a result. According to DNB, it is up to politicians to determine whether pension savings should be encouraged more.

Some measures, like communication aimed at groups that accrue little pension, will provoke little resistance but may also have limited effect. The government could also look at more severe options, like obliging groups with insufficient pension accrual to start saving for retirement or enforcing existing obligations more strictly.

The Trade Union Federation for Professionals (VCP) said that politicians must intervene now to reverse the long-term trend of large groups of workers not building up pensions. “This puts the sustainability of our beautiful pension system under pressure,” according to VCP. The union has been arguing for a mandatory supplementary pension for all working people for years but currently sees too little support for this.