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Prepared by Zwitserleven.


Social Security
Eligibility                     All residents and all employed persons from age 15 – 65.

Retirement Age                  65M/F

Contributions                   Different contributions rates and limits for the various elements of the Social Security

Retirement Benefits             50 years of residence, reduction for each missing year. Benefit flat rate. Single person
                                EUR 13,116, married persons EUR 9,029 each.

Disability Benefits             Salary ceiling 2010: EUR 49,297.
                                Benefits for totally, permanently disabled individuals (80% - 100% disabled): 75% of last
                                full daily wage (up to salary ceiling).
                                Benefits for temporarily disabled individuals (35% - 100% disabled): Initially and if
                                certain conditions are met, wage-related payment phase of 70% of the difference
                                between the individual’s (maximum) daily wage and their work-related income. After
                                this, non-permanently disabled individuals who work to a satisfactory degree receive a
                                wage-supplement of 70% of the difference between the individual’s (maximum) daily
                                wage and their earning capacity (determined by the national medical examination
                                board, UWV). Individuals who do not work to a satisfactory degree are entitled to
                                benefits which are – depending on the degree of disability – equivalent to 70% of the
                                minimum wage.

Death Benefits                  Spouse’s Pension (without children): 70% of net minimum wage, i.e. 70% x EUR 14,017
                                = incl. holiday allowance. Pensions are means tested.
                                Orphan’s Pension: 20% of minimum legal wages, i.e. EUR 3,239. Benefits are means

Medical Benefits                In January 2006, compulsory health insurance, private health insurance and medical
                                expenses schemes for civil servants were replaced by a single health insurance system
                                that covers essential care. Supplementary insurance will remain an option.

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Private Benefit Plans
Eligibility                     Age 21, as of January 2008. For many plans the age eligibility is 18.

Retirement Age                  65M/F

Contributions                   Typically, plans are contributory for the employee with 5% - 7% of pensionable salary.
                                Pension Base or Pensionable Salary: The annual salary, or determined salary, less the
                                Offset: The offset is used because the general old age pension is flat rated, i.e. not
                                related to years of service or income. This offset or reduction replaces the part of the
                                salary that is already covered by the General Old Age Act (AOW). Sometimes the offset
                                is a flat amount not related to the AOW anymore.

Retirement Benefits             Old Age Pension
                                Defined benefits: normally 1.75% pensionable salary times service.
                                Defined contribution: Contribution scale so that benefit will not exceed about 70% of
                                pensionable salary.

Disability Benefits             Geared to fill social security shortfall and to reach a maximum of about 70% of
                                pensionable salary. As new disability legislation came into force on January 1, 2006,
                                filling part of this shortfall is strongly advised against by responsible cabinet members.

Death Benefits                  Spouse’s Pension
                                Usually 70% of projected or actual old age pension.
                                Orphan’s Pension
                                14% of projected or actual old age pension (20% of spouse’s pension). Normally
                                doubled for full orphans.

Medical Benefits                As of January 2006 all employees must participate in the same mandatory health

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Employer Contributions          Social security: Deductible.
                                Private benefit plans: Deductible.

Employee Contributions          Social security: Deductible.
                                Private benefit plans: Deductible.
                                Health insurance system: Income-related contribution by the employer is taxable
                                income to the employee.

Benefits                        All pension benefits are taxed.

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Country Statistics
Population/                                                16.783 million (July 2010 est.)/
growth rate                                                0.39% (2010 est.)
Age structure
0 - 14 years                                               17.4%
15 - 64 years                                              67.7%
65 years and over                                          14.9% (2010 est.)
GDP purchasing power parity/                               USD 680.4 billion (2010 est.)
Real growth rate                                           1.7% (2010 est.)
Agriculture                                                2.6%
Industry                                                   24.9%
Services                                                   72.4% (2010 est.)
Unemployment rate                                          5.5% (2010 est.)
Inflation rate                                             1.1% (2010 est.)
Annual gross salary                                        in EUR
Labourer                                                   General: 32,978           Skilled: 38,896
Professionals                                              Junior: 45,876            Senior: 54,817
Management                                                 Lower: 72,927             Upper: 97,021
Legal minimum wage                                         EUR 18,460 per annum
                                                           (including holiday allowance 2010 est.)
Exchange rate on February 28, 2011                         1 EUR = 1.3765 USD
Currency: Euro

Legislation and Insurance Market Update in Brief
No major changes in legislation or the insurance market in 2010.

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Background Information
Like most Western countries, the Netherlands is facing an ageing population, making the current social security
system more and more expensive. Measures are being taken, and therefore social security is undergoing constant
review by the government.

The Dutch National Insurance Scheme (social security) is divided into three sections:
• National insurance, covering all citizens entitled to old age (AOW) or survivors’ pensions (ANW), child benefits
   (AKW), disability benefits for young people (Wajong) and independent workers (WAZ). This insurance is
   compulsory and is not means-tested. Contributions are income-related, while benefits are at flat rate at
   subsistence level. National insurance is administered by the Social Insurance Bank (SVB).
• Employee insurance, covering risks of unemployment (WW), long-term disability (WIA) and sickness (ZW). This
   insurance is compulsory for employees and the self-employed and is not means-tested. Contributions are a
   percentage of wages and benefits are wage-related.
• Social assistance, accessible to all citizens. Social assistance aims to ensure a basic income level when insurance
   arrangements are not applicable. It is non-contributory, paid from general funds (taxes), means-tested (including
   the family income); the payment level is annually adjusted to wage and price changes. The local authorities are
   responsible for social assistance benefits.

All residents are automatically covered under the National Insurance scheme and all employed persons are covered
under the Employed Persons Insurance scheme.

Contributions to the National Insurance Scheme
• General Old Age Act (AOW): Contributions due until age 65.
• General Surviving Relatives Act (ANW): Contributions due for life.
• General Act for Exceptional Medical Expenses (AWBZ): Contributions due for life.
      National Insurance      Employer Contribution     Employee Contribution        Taxable yearly earnings
                              %                         %                            up to (EUR)
      AOW                     Nil                       17.90                        33,436
      ANW                     Nil                       1.1                          33,436
      AWBZ                    Nil                       12.15                        33,436

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Contributions to the Employed Persons Insurance Scheme

With regard to the employee insurance schemes, these automatically apply to persons legally employed in the
                                        Employer                             Employee
                                        Premiums as a percentage of          To be paid up to earnings ceiling
                                        income                               (based on a 5-day week)
 Health Insurance Act                   The employer pays 7.75% of the income, up to an income ceiling of
                                        EUR 33,436 to the employee. The employee will be liable to pay tax on
 Unemployment Insurance Act             4.20%                                0% / EUR 189,60 per day
 (WW)                                                                        (= EUR 49,486 p.a.)

Retirement Benefits

Retirement Age
Normal retirement:             65M/F
Early retirement:              Not possible

Qualifying Conditions
Old age pension: Age 65 and an insured period from age 15 to 65.

The pension is also payable abroad. The benefits are reduced for each missing year.

Old Age Pension (AOW)

The annual old age pension amounts to the following:

Single person, including holiday allowance: EUR 13,116
Married couple, for each person:            EUR 9,029*

*Single persons sharing a household are treated as a married couple.

Each partner has an independent right to 50% of the state old age pension at age 65. This means that if one partner
reaches age 65, that person becomes eligible to 50% of the pension. The other partner must wait until age 65. A
partner may also receive a supplementary pension on reaching age 65 if the younger partner has limited or no income.

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Disability Benefits

Qualifying Conditions
After a waiting-period of 104 weeks an employee is entitled to disability benefits in accordance with the Labour
Capacity Act (WIA), which entered into force on January 1, 2006, however, benefits only will be granted, if both
employer and employee have shown a satisfying effort to reintegrate the disabled employee. Employees must be
younger than 65 and at least 35% disabled.

This legislation (WIA) only applies to those individuals who had their first sick-day on or after January 1, 2004. The
existing Disability Insurance Act (WAO) remains in force for those who had their first sick-day before that date.

The benefits under the Labour Capacity Act (WIA) depend on the degree of disability, whether it is permanent or non-
permanent, and on the wage that is earned during the period of non-permanent disability. The benefit is calculated
on a monthly basis. A ceiling of EUR 49,297 (2011) per annum applies.

The Labour Capacity Act consists of two regulations; the regulation governing income protection for individuals
registered as completely and permanently disabled (IVA) and the regulation governing the re-employment of non-
permanently disabled workers (WGA).

Pensions are usually paid after a waiting period of 104 weeks, during which the employer is obliged to pay at least 70%
of salary. The period of 104 weeks may be extended to 156 weeks if the employer has not shown enough effort to
reintegrate his disabled employee. The period of 104 weeks may be reduced to 12 if it is obvious that the employee is
permanently disabled. Salary payments during the normal waiting period of 104 weeks may not exceed 170% of salary
over a period of two years.

Employers are obliged to offer suitable work to a disabled employee during the waiting period.

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The pensions amount to:
• IVA - Permanently and fully disabled individuals (80%-100% disabled), 75% of last full daily wage (maximized to
   salary ceiling).
• WGA - Non-permanently disabled individuals (35%-100% disabled)
• Wage-related disability pension: This pension will only be granted if the former employee worked at least 26 out of
   last 36 weeks prior to receiving a disability pension. The duration of pension is limited in time and depends on the
   number of years the individual has worked.
         Number of years worked           Duration of wage-related disability pension
         < 5 years                        6 months
         5 years >                        9 months
         10 years >                       1 year
         15 years >                       1,5 years
         20 years >                       2 years
         25 years >                       2,5 years
         30 years >                       3 years
         35 years >                       4 years
         40 years >                       5 years

As of January 1, 2008, the period of benefit payments are determined by the number of working years, whereas before
2008, the individual’s age determined this period.

After the wage-related disability pension, an individual will receive either a wage supplementary disability pension or a
disability pension based on minimum wage. The determining factor for receiving either benefit is whether individuals
earn at least 50% of their earning capacity. The earning capacity is determined by the national medical examination
board (UWV). Individuals who earn 50% of earning capacity receive a wage supplementary disability pension.
Individuals who do not earn 50% of their earning capacity receive a disability pension based on minimum wage.

Wage supplement disability pension - Calculation method: 0.7 * (maximized, last full daily wage -/- earning capacity)

Disability pension based on minimum wage - Calculation method: benefit percentage * minimum wage
(2011: EUR 18,460)

“Benefit percentage” is determined as follows:
         Degree of disability     Benefit percentage
         35 – 45%                 28%
         45 – 55%                 35%
         55 – 65%                 42%
         65 – 80%                 50.75%

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Individuals who do not meet the 50% earning capacity-test, but who are 80% - 100% disabled, receive a wage
supplementary disability pension.

Example 1:

Wage before disability:                          EUR 40,000
Degree of disability:                            60%
Earning capacity:                                EUR 16,000
Income during disability:                        EUR 12,000 (over 50% of earning capacity)
Wage-related disability pension:                 0.7 * (40,000 ./. 12,000) = EUR 19,600
Total income:                                    EUR 12,000 + EUR 19,600 = 31,600, after that
Wage supplement disability pension:              0.7 * (40,000 ./. 16,000) = EUR 16,800
Total income:                                    EUR 12,000 + EUR 16,800 = EUR 28,800

Example 2:

Wage before disability:                          EUR 40,000
Degree of disability:                            60%
Earning capacity:                                EUR 16,000
Income during disability:                        EUR 7,000 (less than 50% of earning capacity)
Wage-related disability pension:                 0,7 * (40,000 ./. 7,000) = EUR 23,100
Total income:                                    EUR 7,000 + EUR 23,100 = EUR 30,100, after that
Disability pension based on minimum wage:        42% * EUR 16,858 = EUR 7,080.36
Total income:                                    EUR 7,000 + EUR 7,080.36 = EUR 14,080.36

If the disability started after January 1, 2006, benefit payments will begin in 2008. This benefit will be paid for at least
3 months; however, the period can be extended depending on the working history of the disabled person. For every
working year, the benefit will be paid for an extra month, with a maximum of 38 months.

3 years        3 months
4 years        4 months
5              5
6              6
…              …
37             37
38 years >     38 months

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Death Benefits

Qualifying Conditions
Widow’s/Widower’s Pension

Beneficiaries can be surviving relatives (including partners to whom the insured is not legally married) with a child
under 18, disabled relatives, surviving relatives born before January 1, 1950. Pensions are means tested.

Orphan’s Pension

Pension is paid to semi-orphans and to full orphans, and is payable until the age of 16. The pension can be extended if
the orphan is disabled; orphans in further education receive benefits until the age of 21. Pensions are means tested.

Widow’s, Widower’s and Partner’s Pension (ANW)

Qualifying surviving relatives without children receive 70% of net legal minimum wage, including holiday allowance
of EUR 14,017 per annum.

Semi-Orphan’s Pension (ANW)

20% of net legal minimum wage, including holiday allowance of EUR 3,239 per annum.

Full Orphan’s Pension (ANW), including holiday allowance:

Under age 10:      EUR 4,485 per annum
Age 10 - 16:       EUR 6,728 per annum
Age 16 - 21:       EUR 8,971 per annum

Above mentioned ANW benefits are means tested.

Sickness Benefits

Qualifying Conditions
Sickness benefits are provided to all employees, with no qualifying requirements.

The Sickness Benefit Act (ZW) represents a kind of safety net for employees under the age of 65, who are not entitled
to benefits from their employers and are unable to work due to illness. They are entitled to daily benefits of 70% of
their earnings, up to a ceiling of EUR 188.88 per day, payable for up to a maximum of 104 weeks, at which point the
beneficiary may become eligible for a disability pension.

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Medical/Health Benefits

Health Insurance Act
With the Health Insurance Act (Zorgverzekeringswet) of January 2006, health insurance became compulsory for all
residents of the Netherlands.

Main features of this change are:
• Single package - Everybody is covered by a health insurance that consists of a basic package regulated by law. The
  package is similar to the cover that existed before under the Social Health Insurance Act (Ziekenfondswet).
• Mandatory insurance - From January 1, 2006, everybody who resides or pays income tax in the Netherlands has a
  legal obligation to take out personal health insurance. Parents must do so for their children. No nominal
  premiums are payable for children up to the age of 18. Two groups do not have to take out insurance, namely
  those with conscientious objections and members of the armed forces on active service.
• Acceptance obligation - Insurers are legally bound to accept anybody who applies for a health insurance, regardless
  of age, gender or state of health. This increases the options for switching to another insurer. An insurer is not
  allowed to charge higher premiums on the grounds of age or health. This keeps care accessible to everybody.
• Options - Even though there is a single package, everybody has various options as explained below. The premium
  depends on the extras chosen.
• Insurer - From January 1, 2006, it is possible to choose a health insurer. Insured persons have the right to change
  insurer once a year. This right exists regardless of income, type of care or age. This is one of the advantages of this
  system, since differences exist between insurers in terms of quality, service and premiums.
• Supplementary insurance - It is possible to get supplementary insurance for care not covered by the basic package.
  Insurers are not legally bound to accept applications for supplementary insurance.
• Personal excess - By law there is an excess of EUR 165 for 2010. A higher excess can be chosen.
• Types of policy - There are two types of policies:
• In-kind policy: The insurer concludes sufficient contracts with care providers (like hospitals) to deliver the insured
  care for the insured individuals. The insurer pays directly to the care provider. Insured persons may go to any care
  provider the insurer has concluded a contract with for this type of policy. Under this policy, insured persons might
  not receive full reimbursement for all their costs if they prefer to go to an un-contracted care provider.
• Reimbursement policy: Insured individuals may choose a care provider, but they must first pay the care provider’s
  bill before receiving reimbursement from the insurer. The insurer and care provider however can agree that the
  insurer will pay the bill.

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The premium for the new health insurance system consists of two components:

1.   Insurance premium, payable to the insurer: Everyone from the age of 18 pays their insurer a flat rate premium for
     the basic package regulated by law. Children under 18 must be insured, but do not pay this premium. The
     premium depends on the insurer and the type of insurance chosen. The average premium is about EUR 1,150 per
     annum according to 2006 estimates. This amount excludes supplementary insurance. The premium is unrelated
     to age, gender, state of health and income.

2.   Income-related contribution, payable via the Inland Revenue: Everyone who has an income must pay an income-
     related contribution for their health insurance. The employer is obliged to reimburse the employee fully for this
     contribution. The contribution is 7.75% of the income and is payable up to a maximum income of EUR 33,436.
     The insured person is liable to pay tax on this.

Work Injury Benefits
There is no separate work injury compensation plan. Work risks are covered by the general social security system.

Unemployment Benefits

Qualifying Conditions
•    Employee must have worked 26 out of the last 36 weeks
•    Employee must have worked 26 out of the last 36 weeks and 4 out of the last 5 years

Re: point 1 above:
• 2 months 75% of the maximum wages of EUR 49,298
• 1 month 70% of the maximum wages of EUR 49,298

Re: point 2 above:
• For every working year the benefit will be paid for an extra month, with a maximum of 38 months.

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Other Information

Reciprocal Social Security Agreements
Argentina, Australia, Austria, Belgium, Bosnia-Herzegovina, Brazil, Canada/Quebec, Cape Verde Islands, Chile,
Croatia, Cyprus, the Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland, Indonesia, Ireland, Israel, Italy, Jordan, Korea (Republic), Liechtenstein, Lithuania, Luxembourg, Macedonia,
Malta, Monaco, Morocco, the Netherlands’ Antilles, New Zealand, Norway, Paraguay, the Philippines, Poland,
Portugal, Romania, Serbia and Montenegro, Slovakia, Slovenia, South Africa, Spain, Surinam, Sweden, Switzerland,
Thailand, Tunisia, Turkey, the United Kingdom, the United States of America and former Yugoslavia.

On January 1, 2002 the Act on limitation export of benefits (Wet Beperking Export Uitkeringen) came into effect. If
someone emigrates to a country which has no reciprocal agreement with the Netherlands, they will not be entitled to
any Dutch social security. Beneficiaries who live in a non-agreement country will lose their Dutch entitlement to
social benefits after three years.

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Background Information

Social Security Gaps
The government has reduced the social security benefit levels during the last decade. However, private insurance
products can replace the discontinued coverages or fill the gaps. Most employers have concluded insurance contracts
to continue the cover. As these social security costs were previously borne by the employee, employee contributions to
cover the costs of these private coverages are quite common and accepted.

Recent Developments
Until recently only defined benefit plans were considered appropriate and were therefore customary. Most of these
plans are partially written on a final pay basis and are always integrated with social security (tax requirement).
However, the reduction of state benefits, the further refinement in pension legislation and the increasing average age
of the working population require re-evaluation of this practice. The heavy cost burden of the classic final pay plan is
the main reason why more and more Dutch companies are changing their pension plans into average pay plans and
even into defined contribution plans, or into hybrid plans.

A recent development of defined benefit plans is the career average plan with indexing. Within this system the
benefits accrued during a career are linked to an index. A more detailed description can be found in this section.

In many cases employment conditions in the Netherlands are negotiated by trade unions and employers’
organizations which often settle employment conditions for an entire segment of industry. Subjects for discussion
include salary scales, working hours, holidays, and other conditions of employment. However, pension plans are also
becoming an important topic. The duration of most Collective Labour Agreements (CLAs) is 1 to 3 years.

Many of these CLAs contain early withdrawal or VUT arrangements. Voluntary early withdrawal (Vervroegde Uit
Treding, VUT) is not an early retirement option under a pension plan. In most cases VUT is a non-funded early
retirement option under a CLA. In 2005 the government launched legislation to remove the fiscal attraction of early
retirement (before age 65). Changes had to be made and were implemented on January 1, 2006. Early retirement
remained possible; however, the extent to which it can be financed and structured by existing employer sponsored
plans had been reduced.

Main changes:
• Retirement before 65 is more difficult due to tax law.
• The existing pension plan can be maintained for employees who, on December 31, 2004, were older than 54.

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Present Customary Benefit Practices
Tax legislation requires that benefit entitlements should consist of (deferred) annuities. Old age pensions and various
types of death and disability benefits are usually combined in one plan. Pension plans must contain a form of
integration with social security, i.e. the total benefit result must take into account social security. The so-called offset
formula is used since the general old age pension is a flat rate, i.e. not related to income or years of service.

Defined Contribution Plans
Legislation and tax rulings with regard to benefit plans have been adjusted. Implementation of defined contribution
plans is becoming more common.

Larger organizations have changed, or are contemplating a change, to defined contribution plans.

Specifications of Defined Contribution Plans
The specifications given hereafter for defined benefit plans apply also to defined contribution plans. Even the
definition of pensionable salary, i.e. annual base salary, less a social security offset is often used. In this case the tax
authorities also require that state pensions are taken into consideration. Most often the risk benefits (death,
disability) are defined in the same way as in a defined benefit plan, i.e. pensionable salary x years of service.

Pensionable Salary
•   Annual Base Salary: Normally 12 or 13 monthly salaries increased by holiday allowance (in most cases 8% of 12
    months’ salary). Bonuses and other variable elements are often excluded. Shift workers’ allowances are often
    insured under a separate (career average) plan.
•   Pensionable Salary: Annual base salary less a social security offset.
•   Pensionable Service: Years and full months beginning from date of employment.

Age limit:         21 (sometimes below 21), as of 2008
Vesting period:    None

Part-time employees must be included (proportional benefit); no bias in entitlements for males and females is

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Employee Contributions (Customary Defined Benefit Plans)
Employee contributions may probably no longer be linked to the actual premium. A customary contribution level is
4% to 7% of pensionable salary, representing about 33% of net cost, calculated over the entire career. There are also
many non-contributory pension plans.

Contribution Scale (Defined Contribution Plans)
A typical contribution scale is difficult to define and depends largely on the objective of the plan. In most cases a
contribution table is designed with age categories of maximum 5 years and a contribution expressed as a percentage
of pensionable salary.

The Wages Tax Act dictates the rules for the maximum contribution scale.

Cost of Survivors’ Benefits and Disability Benefits (Defined Contribution Plans)
In most cases the cost of survivors’ and disability benefits are borne entirely by the employer. However, there are cases
where these premiums are deducted from the joint contributions to the savings capital.

Pensions are limited by law. Exceeding these limitations will mean extra taxation or even penalties. As a general rule
one can say that an overall retirement income of 70% of the final salary (including social security benefit) will be

Retirement Benefits

Retirement Age
Normal retirement:           The first of the month in which age 65 is reached.

Qualifying Conditions
Retirement benefits are payable from normal retirement age.

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Customary Defined Benefit Plans
Plans are usually based on:
• Final pay (= last salary)
• Career average: With this system salary increases will be based on future years of service only.
• Career average with index increases: The accrued benefits are regularly adjusted according to an index. The same
   applies to benefits in course of payment and to benefits for early retirees.

Age discrimination is not allowed in final pay plans. This means that salary increases must result in correspondingly
higher pensions for all employees, even shortly before retirement.

There is a tendency towards career average with indexation.

A common formula for the defined benefit old age pension is:
• Pensionable Service x 1.75% x Pensionable Salary for final pay systems
• For career average plans with or without indexation a percentage of 2.25% may be used (assuming retirement at
   age 65).
• For final pay plans a percentage of 2% may be used (assuming retirement at age 65).

Typical Structure of a Defined Contribution Plan
The basis is a lump sum benefit payable at normal retirement. This capital may not be taken as a cash amount but
must be used to buy an old age pension (legal requirement). The lump sum may be used for the following purposes:
• Purchase of a flat rate old age pension only, payable as long as the employee is alive and commencing on normal
   retirement date.
• Purchase as described under 1, but combined with a spouse’s pension.
• Purchase of pensions as mentioned under 1 and 2, but with an annual fixed escalation factor of maximum 3%.
• As 1, 2 and 3 but payable earlier, for example at age 60.

Nowadays, defined contribution plans are often based on a unit-linked/universal life construction.

Disability Benefits

Disability Gap
The Labour Capacity Act (WIA) covers a salary up to a level of EUR 49,297 per annum. This amount is revised
periodically. Any salary amount in excess of this amount is often covered by private insurers.

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Sickness Benefits
Insurance companies offer an insurance product for the coverage of this risk. The insurance can take various forms. A
popular version for larger employers is a stop loss product, which only pays benefits if certain claim limits have been

It should be noted that many collective labour agreements require that the employer continues to pay a full salary
(100%) during the first year of incapacity. As of January 1, 2004 the second year is also to be considered as sickness and
the benefit is often reduced to 70% of salary.

Disability Pension (Customary Defined Benefit Plans)
70% of the difference between the insured person’s actual salary and the salary ceiling is used for the calculation of
benefits under the Disability Insurance Act. For 2011, this salary ceiling amounts to EUR 49,297 per annum.

Disability (Defined Contribution Plans)
Disability benefits such as waiver of premium payment in the event of disability and disability pensions are insured in
most cases.

Death Benefits

General Surviving Relatives Act (ANW)
The benefit from the General Surviving Relatives Act is limited. Most pension plans include benefits to improve the
income for the spouse.

The General Surviving Relatives Act is basically possible in either of the following two forms:
• Annuities
• Lump sums which must be converted into annuities upon payment

The annuity form provides more flexibility since there is a choice of type of annuity. This choice can be deferred to the
time when this benefit is needed.

It is generally accepted that premiums for this insurance are paid for by employees.

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Customary Defined Benefit Plans
Widow’s/Widower’s Pension

The Widow’s/Widower’s Pension usually amounts to 70% of the accrued or projected old age pension. The
widow’s/widower’s pension continues in case of remarriage. The pre- and post-retirement risks are usually combined.

Partner’s Pension

Partner’s pensions (female/male, male/male or female/female) are possible, provided that the partners:
• Are not related and are both single.
• Have had a joint household for at least 6 months.

Often employers request the partners to be in possession of a cohabitation contract drawn up by a public notary, if
the joint household has not existed for at least 5 years.

This does not include registered partners. They are treated equal to spouses (widow’s and widower’s pensions).

Partner’s pensions must be of the same level as widow’s/widower’s pensions. Partner’s pensions have become a
customary and accepted benefit. The reason is that tax treatment of single persons forming one household is the
same as for married couples. In addition, social security treats these persons as married.

Orphan’s Pensions

Orphan’s pensions are usually included as follows:
• Semi-orphans, i.e. 1 parent is deceased: 14% of the projected old age pension.
• Full orphans, i.e. both parents are deceased: 28% of the projected old age pension.

Usually there is no limit to the number of eligible children. Orphan’s pensions are usually payable until age 18, or age
21 in certain cases. Often payment of the orphan’s pension is continued beyond the final date − mostly to age 27 − if
the child is in full-time education or disabled. Orphans who are children of single males or females are treated as full

Survivors’ Benefits (Defined Contribution Plans)
Widow’s, widower’s and partner’s pensions are often insured separately on a defined benefit basis. The typical formula

Years of service x 0.0125 x Pensionable salary

This provides the same level of benefits as under a standard defined benefit plan.

Orphan’s pensions are usually 20% (40% for full orphans) of the insured widow’s, widower’s or partner’s pension.

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Other Benefits

Severance Pay
Severance pay is more and more customary in the Netherlands especially for management members under certain
conditions. Termination of larger groups of employees is sometimes negotiated under a so-called social plan.

Life Course Plan (Levensloopregeling)
As of January 1, 2006 employees have the legal right to participate in the Life Course Plan. An employee may save a
maximum of 12% of gross annual salary up to a maximum of 210% of last gross annual salary. Savings may be used to
finance any kind of leave during employment. Leave includes long-term leave for care of next of kin, sabbatical leave,
parental leave, educational leave or other kinds of leave. Taking leave is only possible during employment. Savings
may also be used for (partial) early retirement.

Taking leave is not a right and must be mutually agreed on by employee and employer. Exceptions to this rule are
parental leave and long-term leave for care of next of kin. Permission for taking these kinds of leave must be granted
by the employer (for a maximum period of time).

A transitional regulation is applicable to employees who were 51 or older on December 31, 2005, but younger than 56.
The savings-maximum of 12% per annum does not apply for this group. Thus, these individuals are able to save 210%
of their last gross annual salary in a shorter period of time.

As of January 1, 2006, early withdrawal or pre-pension schemes have ceased for employees who were younger than 56
on December 31, 2005. However, employees who were 56 or older before December 31, 2005 may continue to
participate in the above-mentioned schemes that their employers offer. If the employer does not offer these schemes,
this group may participate in the Life Course Plan and save up to 12% of gross wage per annum.

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The Dutch income and wage tax is divided into 4 brackets with different rates. The progression starts at 33.00%
(15.10% after age 65) and increases to 52%.

Employer Contributions
Employer contributions to pension plans, health insurance plans, sickness funds and lump sum benefit plans (group
life insurance) are treated as wages and similar expenses. Consequently, they may be considered as tax-deductible
costs, provided the employees receive an irrevocable right to benefits.

Past Service Liability: Since January 1, 2000 past service must be funded immediately. Adjusting period for 10 years,
i.e. all pension plans must have financed/funded the liability of the past services.

Ban on Postponement in Payment: Pension rights must be accrued and financed during participation and must at
least be in proportion to time.

Employer contributions for health insurance plans, sickness funds and lump sum death benefit plans are considered
as taxable income to the employee.

The Wages Tax Act considerably influences employee benefit practices and means that provisions must be made by
means of pensions. It also defines the beneficiaries: employees, their spouse and minor children. Other family
members to whom the employee is not married cannot be insured for widow’s pension or widower’s pension. Partner
pensions are also included now.

Employee Contributions
Pension Plans

Employee contributions to pension plans which meet the legal requirements are deductible before social security and
wage taxes are calculated.

All pension benefits constitute taxable income for the employee.

Annuity Policies
Since January 2001 premiums may only be deducted in case of a proven pension shortfall - referring to years with
insufficient pension build up.

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Double Taxation Agreements
Albania, Armenia, Argentina, Aruba, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Brazil,
Bulgaria, Canada, China, Croatia, the Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany,
Ghana, Greece, Guernsey, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jersey, Kazakhstan, Korea
(Republic), Kuwait, Latvia, Lithuania, Luxembourg, Macedonia, Malawi, Malaysia, Malta, Isle of Man, Mexico,
Moldova, Mongolia, Morocco, New Zealand, Nigeria, Norway, Pakistan, the Philippines, Poland, Portugal, Qatar,
Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Suriname,
Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Uganda, the Ukraine, the United Arab Emirates, the United
Kingdom, the United States of America, Uzbekistan, Venezuela, Vietnam, former Yugoslavia, Zambia and Zimbabwe.

Benefit Payments from Abroad
In general benefit payments coming from abroad are considered income and thus taxable for residents of the
Netherlands, taking into account double-taxation agreements.

Transfer of Accumulated Policy Reserves from Abroad
Incoming reserves (from a foreign pension fund or insurer) are in almost all cases not taxable. The resulting benefits
from the reserves will, however, be subject to taxation.

Tax Legislation as of January 1, 2001
On January 1, 2001, a completely new income-tax system took effect. The new tax system is based on a “box system”,
where every box has its own taxable income and its own tax rate.
• Box 1 taxes income from work and housing, e.g. income from employment, profit from a business, and profits
   from the own home (assessable rental value ./. mortgage rate). This income is taxed at a maximum rate of 52%.
• So-called “income from a substantial interest” is taxed at 25% in box 2.
• Box 3 relates to income from savings and investments. The new tax system does not tax actual income, such as
   interest on a savings account, but the balance of the bank account itself. Every year one pays 1.2% - the so-called
   “asset-return levy” - over the total assets, i.e. over assets minus debt.

Other Information

Pension Act
The Pension Act (PW) guarantees that pensions promised by an employer to employees are paid out, and obliges the
employer to safeguard the entitlements by:
• Setting up a company pension fund
• Insuring the entitlements with a life insurance company licensed by The Dutch Central Bank (De Nederlandsche
• Joining an industry-wide pension fund

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Transfer of Reserves in Case of Change of Employment
Departing employees have a legal right to transfer the reserves to the pension fund or insurer of the new employer.
The calculation of the reserves to be transferred must be based on a general ruling issued by the Ministry of Social
Affairs and Employment. The new employer will grant extra years of service on the basis of the transferred reserves.

Indexation of Benefits for Early Leavers
Employers providing indexation of benefits in course of payment for employees who have reached retirement age with
the employer, or who died while in service with the employer (indexation of death benefits), must also offer this
indexation to former employees who have reached retirement age or who died while they were no longer in service
with the employer. Paid-up policies for early leavers not yet in course of payment must receive this indexation also.

Ban on Surrender
The Pension Act does not allow surrender (except for very small pension amounts).

Transfer of Pension Reserves to another Country
Transfer of reserves to another country has become difficult and in many cases impossible. The permission of the tax
authorities must be obtained. The reserves to be transferred will be subject to wage tax dependent upon the
international tax treaty with the new host country. In case of emigration the tax payer receives a conservative tax
assessment the day before leaving the country. The Supervisory Authorities must grant authorization to transfer.

Partner Pension
A dependant’s pension for a partner to whom the insured is not legally married comes under the protection of the
Pension Act. Conclusion of a partner pension is compulsory. This benefit must be funded similarly to widow’s
pension/widower’s pension. The vesting regulations do not entirely apply to partner pensions.

Conversion of Survivors’ Pension into higher Old Age Pension
The survivors’ pension can be converted into a higher old age pension. Concerning the Pension Act (Pensioenwet), the
Act on Equal Treatment of Men and Women (Wet Gelijke Behandeling van mannen en vrouwen) and the General Equal
Treatment Act (Algemene Wet Gelijke Behandeling), the following changes are effective as of January 1, 2002:
• The participant with, or without a spouse or partner, is entitled to convert the survivors’ pension which
   accumulated after January 1, 2002 into a higher old age pension. The spouse or partner has to agree to this
   conversion in writing.
• With regard to equal treatment: The old age pension obtained by conversion of the survivors’ pension must be
   equal for men and women.
• The aforementioned does not apply to the voluntary survivors’ pension.

Since January 1, 2007, it has also been possible to convert the old age pension into a survivors’ pension. However
restrictions can be made.

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IAS 19/ RJ 271
The International Accounting Standards (IAS 19; locally manifested as RJ 271) with respect to pensions and other
long-term benefits for employees of Dutch companies were implemented on January 1, 2005. These accounting
standards are more or less similar to FAS 87.

Insurers and pension funds (or the employer) must provide detailed information about by laws and pension rules to
the employees. Employees now also have a legal right to obtain information directly about (paid-up) benefits from the
insurer or pension fund. Reimbursement of costs may be required.

Act on Equalisation of Pension Rights in the Event of Divorce
Pension Entitlements in the Event of Divorce

In the event of a divorce, the former spouse has a right to the widow’s or widower’s pension vested until the divorce is
registered. If the employee remarries, the second partner is entitled to the full widow’s or widower’s pension minus the
entitlement of the first spouse.

When adjustment of pension entitlements in the event of divorce came into force, divorcing spouses both have an
independent claim to 50% of the old age pension accrued during marriage. Exceptions may be arranged in the nuptial
agreement or in the divorce settlement. Each of the former spouses may make a direct claim on the pension fund or
insurer of the former married partner’s employer. The claim must be made within 2 years of the date of divorce. The
former spouse and employee can also agree to convert the insurance into a policy on his or her own life. The pension
fund or insurer must also agree to convert the benefit.

Cost-of-Living Adjustment
Sometimes a fixed annual escalation factor of maximum 3% (compound) is included. Some plans link benefits in
course of payment to a cost-of-living index. It is only possible to adjust the pensions of the employees. If paid-up
benefits are adjusted, then the former employees’ benefits must also be adjusted. Index-linking may be limited to
available reserves for this purpose.

Equal Treatment
EU regulations and EU case law require that pension plans may no longer discriminate. The result is that pension
rules must include widower’s pensions. Benefit levels for part-time employees are often calculated by using a full-time
annual salary and then reducing the years of service. The use of a unisex mortality table is not (yet) required.

With regards to the old age pension in a pension plan, it is prohibited to disclose marital status. For example, the
offset on behalf of a participant who is single and not cohabiting with a partner may not differ from the offset taken
into account for an employee with a spouse or partner.

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Preliminary Plan
Employees with dependants who have not yet completed their eligibility requirements (such as age and years of
service) are covered for widow’s, widower’s, partner’s and orphan’s pensions on a risk basis.

Dividends (Defined Contribution Plans)
All dividends are used to increase the lump sums. Premiums are generally not reduced. These dividends can be
considerable since premium rates are based on a technical rate of interest of 3%. Unit-linked/Universal Life products
replace cover in lump sums.

Term Life Insurance (Lump Sum Death Benefit)
For tax reasons, a lump sum death may not be included in the pension plan unless it is smaller than 3 months’ salary.
Therefore, lump sum death benefits are always insured separately. This form of coverage is gaining popularity
although the tax treatment is somewhat unfavourable.

Funding Methods
The Pension Act mentions the following possibilities when pension rights are granted:

1) Insurance Funding

Pension plans may be insured with a licensed life insurance company. The Pension and Savings Funds Act mentions,
among other things, the following possibilities:
• The employer takes out an insurance contract and insures the employees.
• Insurance companies use the group deferred annuity contract as a customary funding instrument. Charges may
   take the form of annual single premiums (step-rated premium) or annual level premiums. However, pension rights
   must be accrued and financed during participation and at least in proportion to time.

Note: Unallocated funding by insurance companies is not possible. This means that separate insurance policies with
separate reserves must be established for each individual employee.

Most Dutch group pension plan insurers offer a profit participation system in the form of discounts.

2) Interest Discount (for Defined Benefit Plans only)

The premium rates in use by all insurers are based on a technical interest rate of 3%. The excess interest earned above
this technical rate may be refunded in a number of ways. For larger schemes, investments in stocks are also an option.

3) Lump Sum Insurance with a Savings Element

The dividends generated by lump sum insurance are not utilized to reduce premiums. The dividends are used to
increase the insured capital. Within certain boundaries the profit share can be used for increasing the insured capital.

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4) Contract Term and Termination

The customary term for a group insurance contract is 5 years. Cancellation during a contract term is usually not
possible. Most contracts will even forbid the insurance of additional benefits with other carriers during the contract

Cancellation on the basis of surrender for cash is rarely possible. Most insurance carriers will only allow a paid-up
non-participating contract. Exceptions do exist. Transfer of reserves is still difficult, although the market is changing.

5) Policies Owned by the Employer

The employer is the policyholder, and the employee, the spouse and minor children are the beneficiaries. The
regulations on Insurance Contracts and Pension Act are applicable.

6) Joining an Industry-Wide Pension Fund

The Minister of Social Affairs and Employment may render participation in these plans compulsory when an
organization of employers’ representatives and employees, which sufficiently represents the segment of industry,
requests it, and fulfils a number of conditions, as described in the Act on Industry-Wide pension plans. Over 60
compulsory industry-wide pension funds exist for various industries. Businesses which have already had a pension
plan for at least 6 months before the request was made to render the industry-wide plan compulsory may elect not to
participate, provided their plan insures at least similar benefits. Most industry-wide plans are funded by an average
flat-rate premium unrelated to age or years of service. In most cases, fund profits are used to increase benefits.

(According to the European competition rules the sometimes obligatory participation is still allowed)

7) Formation of a Company Pension Fund

Pension funds can self-administer the pension plan.

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Trends in the Insurance Industry

Pensionable Age (State Pension)
During 2010 the discussions about raising the pensionable age of the Dutch state old age pension (AOW) from 65 to
67 became more intense. Due to demographic trends and budget constraints the government made this a primary
point of discussion demanding urgent attention.

However, in Q1 2010 there were forced elections in the Netherlands due to the fall of the government. Raising the
AOW-pensionable age became a hot topic during negotiations to form a new government, ending in a compromise:

Agreement has now been reached on a two-step approach to raising the state pensionable age, taking the year of birth
as a starting point.
• Year of birth 1954 (and before): pensionable age remains at 65 (i.e. till 2020).
• Year of birth 1955 until (and including) 1959: pensionable age is raised to 66 (i.e. as of 2020).

The new Dutch government has declined for now a further increase to age 67, since several political parties included
in or supporting the government, could only agree to raise the pesnsionable age to 66.

However, due to demographic developments, further increases are expected.

Impact on Occupational Pension Plans
All current occupational pension plans have a recommended pensionable age of 65 according to the existing pension
act. The government intends to introduce fiscal incentives to build up second pillar occupational pensions linked to
the first pillar basic pension via the AOW.

Therefore the annual accrual percentages per year of service will be adjusted in relation to the new pensionable age of
66 for the AOW in 2013. For final salary arrangements, this will mean that the maximum percentage will be adjusted
to the new expected general pensionable age of 66.

For age 67 it was calculated to be 1.9% (currently 2%), and for average salary arrangements up to 2.15% (currently
2.25%); expected is a recalculation adusted to a pensionable age of 66. For defined contribution arrangements the
accrual period will be extended to age 66 instead of the current 35 years. Also, for dependant cover, the maximum
percentages for accrual per year of service will be decreased.

Fiscal Boundaries for Occupational Pension Plans
In the bill the possibility of adjusting maximum percentages before January 1, 2020 is explicitly discussed and is very
likely to be introduced before that date.

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Financial Crisis
The financial crisis is still having an impact on pensions, whether industry-wide pension funds or company pension
funds, or fully insured plans with an insurance company. The invested reserves have decreased, and are only slowly
recovering due to an improving financial market and interests.

Measures taken by the endangered / under funded company pension funds in accordance with the rules of the AFM
are taking effect. Also, due to the recovering stock – bonds markets a large number of company pension funds are
once more above the legally required ‘action-zone’. Combined with the slowly increasing interest level quite a number
of pension funds only just reached the “safe-level” by the end of 2010.

Indexation on annuities / paid out pensions are however in general frozen for 2011, and possible also for 2012, due to
lack of funding and to further the financial position of the pension funds.

However, taking into account the total current package (worsened financial situation, demands on governance,
tightening up of supervision by the Dutch National Bank (= supervisor) and increased liability of pension fund board
members), a number of company pension funds are turning to each other, or to branch pension funds or private
insurers to outsource their obligations. Over the year 2010 the low market interest rates prevented a further
continuation in the trend of divesting company pension funds in favour of private insurers, since this had huge cash
flow / refinancing implications.

Over the last few years hundreds of company pension funds have actually been dissolved, and have turned over their
liabilities etc. to the entities described above.

As per January 1, 2011 a website is available, based on the initiative of the Sociale Verzekerings Bank (SVB) and all
Dutch pension providers.

Via the website, every citizen can check (via a digitalised access code) their 1st and 2nd
pillar pension rights as overall accrual.

Not all pension insurers have linked up to this site yet, but during 2011 this should provide a very useful tool to
obtain an overview on accrued pension rights via state and employer pension plans.

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