Arranging a pension for your employees? Here's what you need to know

Offering a retirement plan is crucial in attracting and retaining talent in a yet competitive job market. A good retirement plan is seen by employees as a valuable employment benefit that contributes to financial security and job satisfaction.

Unfortunately, many employers often put off arranging pensions for their employees because they find pensions complex and think they are expensive. But actually, this perception is not true at all! So, if you've been struggling with arranging pensions for your employees for a while now? Then read on.

What are the four pension pillars?

Ugh, retirement pillars ... Just one of those dry words that makes you not feel like reading any further. Still, it's important that you know something about this. We do our best to explain it as simply as possible. But, we can't promise it won't get boring.

You could think of the pension pillars as different pots through which workers can build up their pensions. These are the pillars:

Pension pillar 1: AOW (General Old Age Pensions Act)

The first pillar is the AOW, which the government regulates for everyone who lives or works in the Netherlands. So as an employer, you don't have to do anything for that. AOW provides a basic income that people can rely on after reaching retirement age. In many cases, this is about 40% of your total pension. So you have to save the rest yourself in pillar 2, 3 or 4.

Pension pillar 2: pension through the employer

The second pillar is a collectively arranged supplementary pension and can often only be accrued through the employer. In some cases, employers are required to arrange this supplementary pension for their employees. These pension plans are usually organized by sector or industry, meaning that employees in the same industry are often covered by the same pension plan.

These companies have a collective pension plan to which both the employer and the employee contribute. The amount is determined by the industry collective bargaining agreement.

Pension pillar 3: supplementary pension (self-saving and investing)

Employees can save or invest extra themselves to supplement their pensions. This can be done through various financial products, such as annuities. This option gives employees more control and flexibility over their retirement savings. For example, they can choose to withdraw assets even before retirement if it turns out that they reach their goals earlier than expected. Or they can have a large amount paid out right at the beginning of retirement to take a long trip, for example.

Pension pillar 4: pension from own funds

Employees can choose to use assets such as savings, investments, or real estate as a form of retirement. These assets can be an important source of income during the retirement years. If you accrue pension under pillars 2 and 3, you will receive a tax benefit. You can deduct the money you set aside for your pension from your income in box 1. You do not have this tax benefit if you accrue pension through pillar 4. 

So now you know what the four pension pillars are and then you immediately know the most important thing. As an employer, you only have to deal with the second pillar. The first pillar is for the government and the third and fourth pillars are up to the employees themselves to set up as they wish.

But, how do you arrange that second pillar?

Which pension providers are there?

Many employers suffer from procrastination because they think arranging pensions is too difficult and too expensive. As soon as they really can't get away with it, they run straight to a large, well-known pension fund such as ABP, Zorg en Welzijn, or Metaal en Techniek (of course, this is not the case if the employer falls under an industry-wide collective bargaining agreement, in which case it is compulsory in some cases to join). Or they end up with a pension insurer such as A.S.R., Nationale Nederlanden or Aegon. Precisely these types of pension solutions are expensive for employers. They also offer little flexibility.

The lack of flexibility is well inherent in a collective pension fund. But these days, most employees do value the ability to set up an individual plan. Fortunately, thanks to new technologies, disruptor pension funds are now emerging. Because these disruptors work with new technologies, they can offer cheaper and also better services. 

Moreover, they can offer your employees to build up part of their pension through the traditional route, namely through pension pillar 2, but also simultaneously through pension pillars 3 and 4. Through pension pillar 3 and 4, it becomes possible for employees to set goals that fit their vision for the future. And all you as an employer have to do is agree on how much pension you will contribute for your employees. This puts the responsibility of building up a pension on the employee. Which means less administrative work for you.

Your employees' pension arranged in four steps

Here's how easy it should be for you to arrange retirement for your employees, with the right technology:

Step 1: Contact the pension provider.

Step 2: Sign a contract.

Step 3: Provide your employees' contact information.

Step 4: Decide how much pension you want to contribute for each employee.

Your employee does the rest via an app.