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

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

Unfortunately, many employers often postpone arranging pensions for their employees because they find pensions complex and think it is expensive. But actually, this is not true at all! So, if you have been putting off arranging a pension for your employees for a while, read on.

What are the four pension pillars?

Ugh, pension pillars... Exactly the kind of dull term that makes you not want to read on. Yet it is important that you know something about this. We'll do our best to explain it as simply as possible. However, we cannot promise that it won't be boring. You could see the pension pillars as different pots with which employees can build up their pension. These are the pillars:

Pension pillar 1: AOW (General Old Age Act)

The first pillar is the state pension (AOW) and the government arranges that for everyone who lives or works in the Netherlands. As an employer, you don't have to do anything about this. The state pension provides a basic income that people can rely on after reaching their retirement age. In many cases, this is approximately 40% of your total pension. You must therefore 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 built up through the employer. In some cases, employers are required to arrange this supplementary pension for their employees. These pension schemes are usually organized per sector or industry, which means that employees in the same industry often fall under the same pension scheme. These companies have a collective pension scheme to which both the employer and the employee contribute. The amount is determined in the industry collective labor agreement.

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

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

Pension pillar 4: pension from own assets

Employees can choose to use assets such as savings, investments, or real estate as a form of pension. These assets can be an important source of income during retirement years. When you build up a pension through pillars 2 and 3, you 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 when you build up a pension through pillar 4. 

Now you know what the four pension pillars are, and 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 organize as they wish.

But how do you arrange that second pillar?

Which pension providers are there?

Many employers postpone dealing with pensions because they think it is too difficult and expensive to arrange. As soon as they really can't avoid it any longer, they immediately rush to a large, well-known pension fund such as ABP, Zorg en Welzijn, or Metaal en Techniek (this is of course not the case if the employer falls under a sector-wide collective labor agreement, then in some cases it is mandatory to join). Or they end up with a pension insurer such as A.S.R., Nationale Nederlanden or Aegon. These types of pension solutions are precisely the ones that are expensive for employers. They also offer little flexibility.

The lack of flexibility is inherent to a collective pension fund. But nowadays, most employees value the option of drawing up an individual plan. Thanks to new technologies, disruptor pension funds are now also emerging. Because these disruptors work with new technologies, they can offer cheaper and better services. 

In addition, they can offer your employees the opportunity to build up part of their pension in the traditional way, namely via pension pillar 2, but also simultaneously via pension pillars 3 and 4. Via pension pillars 3 and 4, it becomes possible for employees to set goals that match their vision for the future. And all you have to do as an employer is agree on how much pension you invest for your employees. The responsibility for building up the pension therefore lies with the employee. Which means you have less administrative work to do.

Arrange your employees' pensions in four steps

This is how easily you should be able to arrange the pension for your employees, with the right technology:

Step 1: Contact the pension provider

Step 2: Sign a contract

Step 3: Provide the contact details of your employees

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

Step 5: Your employee arranges the rest via an app