Difference between AOW benefit and employer retirement pension
"Why do I receive my pension benefit from the employee pension later than the state pension benefit?" This is the question Pension and Income Advisor Ron Mulder receives almost weekly from clients. So in December, he decided to put it to the test. He posted on LinkedIn the question, "What do you think the retirement age is? The answers - as expected - varied widely.
Difference between pensioner and state pensioner
'The retirement age between the first and second pillars of retirement do not have to be the same. Everyone used to retire at 65. From that age, you were paid AOW benefits from the government and the supplementary retirement pension you had built up through your employer. This has changed because people are getting older: the AOW age is therefore no longer the same as the retirement age. You receive AOW from the day you reach AOW age, while the pension target age is 68.
When asking about retirement age, it is important to make a clear distinction between retirement age for the first or second pillar. This can result in a difference between the effective date of the AOW benefit and the retirement pension from the employer. This ensures that the state pension age is no longer always the same date as your pension target age from the pension plan. Many participants in a pension plan do not know this. This can cause unexpected surprises and this is of course not desirable just before your retirement," said Ron.
State pension age
'I would like to give a general explanation of pension to clarify my answer more. The first pillar of pension is the AOW, the General Old Age Pensions Act: this is basic pension from the central government. Everyone who has lived or worked in the Netherlands receives this from AOW age until death. But what exactly is your AOW pension age? The AOW age is prescribed by law and depends on the date of birth. For the year 2025, the AOW age is 67 for people born after December 31, 1957 and before January 1, 1959," Ron explains. 'People are getting older and this means that people have to work longer and also contribute to the AOW for longer. This ensures that the AOW scheme remains affordable in times of increasing aging. The government helps with this by making it possible for people to continue working healthily for longer. This set AOW age has been going up in steps since 2013 and is adjusted to the increase in average age expectancy.'
Pension through employer
'The second pillar is pension accrual through the employer. This gives you, as a retiree, an additional benefit on top of the state pension. The pension target age was raised to age 68 on January 1, 2018. This age may also increase further in the future as life expectancy increases. If you worked as an employee, you accrued pension through the pension plan with your employer(s). As an employee, you contributed to the pension accrual; the employer paid the rest through a premium to the pension provider. If you were self-employed or ran your own business it is different. In this case, you did not accrue a pension through your employer," Ron explains.
Supplementary pension
'You may not be satisfied with the state pension and pension you have accrued through your employer. About 90% of employers have a supplementary pension plan. For example, through pension savings (pension investment). This gives you as a retiree a supplementary benefit on top of the AOW benefit and the pension built up from the employer.'
UPO
'A UPO is a Uniform Pension Statement and gives you an annual update on your future pension. You only receive this statement if you are a member of a pension plan. Did you accrue pension with multiple employers? Then you will also receive multiple UPOs. On www.mijnpensioenoverzicht.nl you can find this information at a glance.
It is important - even if it sounds far away to some - to think about building up a pension now. My colleagues and I are happy to answer your questions and can help you go through the various personal options. concludes Ron.
Make an appointment with an Alpina retirement advisor or contact Ron directly at [email protected].
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