Some 1.8 million Dutch have pensions with no prospects of increases

Around 1.8 million Netherlands residents have pensions with no prospects of increases. It concerns benefit agreements with insurers. The pension amount is fixed, which means that benefits cannot be reduced. But due to strict rules, they also haven’t been rising for years, pension advisors told the Telegraaf.

“For someone about to retire, the security of a guaranteed benefit is quite nice. But if you are now 30 or 40 years old and have such a benefit agreement somewhere, you can be sure that money will become less valuable in the coming years,” pension adviser Rosemarie van der Velden of Jansen and Partners told the Telegraaf.

“I dare say that over 90 percent of these pensions become less valuable due to inflation,” said pension advisor Leon Mooijman of the employers’ association AWVN.

A benefit agreement means that your pension payout is fixed - if you have built up a pension of 15,000 euros per year during your career, you will receive 15,000 euros per year regardless of what happens on the stock exchange. While the certainty sounds nice, in practice, it means that the benefit does not grow. And that is quite the issue when inflation is high. In 2022, for example, inflation was 10 percent in the Netherlands. Large pension funds increased benefits to compensate for that, but that did not happen with benefit agreements with insurers.

There is an option to increase pensions within benefit agreements, pension advisor Jan van Harten of Gommer Pensions Group told the newpsaper. “The only condition for this is that the insurer achieves a return of more than 3 or 4 percent on government loans. But the interest rate on government loans was so low for a long time that 3 or 4 percent was completely unattainable.” The interest has increased recently, but insurers look at the average return in the last ten years. “So it will take some time before these pensions increase.”

Van Velden advised especially younger people with benefit agreements to see if they can transfer to another pension provider. “If you changed employers after January 1, 2015, you can request a value transfer. You then have your old pension transferred to your new employer's scheme, usually a premium scheme. Then you have a chance of a higher pension.” She stressed that staying on the benefits agreement may be more beneficial for people nearing retirement. “The security of a guaranteed benefit is quite nice.”