
The Dutch Pension Plan - luu
http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?module=Search&mabReward=relbias%3As%2C%7B%221%22%3A%22RI%3A11%22%7D&_r=1
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smutticus
What a puff piece.

I am the proud owner of both a Dutch pension and an American 401k. I much
prefer the American 401k. If only because I don't have to pay 15% front loaded
commissions everytime money gets put into a fund. I had to claw and fight with
my Dutch pension company to even understand how much of my contribution they
were taking on their front loaded mutual funds. And the sad part was that most
of my Dutch colleagues didn't even understand why I was so upset about it.

Another thing that sucks about the Dutch pension system is that once I hit 65
I'm forced to buy an annuity with it. Most likely my pension company will
trick most people into buying an annuity directly from them, but I do have the
option of shopping around. Work for multiple companies, get multiple pensions
and multiple annuities. There are options for rolling over one pension into
another. But nothing as straight forward as a TIRA, and nothing where you can
choose what funds are actually held.

 _I was told by an independent Dutch pension expert that my Dutch pension is
standard, so my case isn 't an outlier._

~~~
wsc981
As a Dutch freelancer, I will avoid collective pension funds like the plague.
I'm quite certain that once I reach the age of my retirement (70?), there will
be very little money, if any, left in the collective funds.

The biggest issue with the Dutch pension system is that one doesn't safe for
himself / herself, but instead pays for the current elderly people. With more
and more elderly people and less and less workers, eventually this system
won't be sustainable anymore.

Dutch people should watch this informative movie:
[http://www.dumpert.nl/mediabase/6576741/e81f2c3e/beste_pensi...](http://www.dumpert.nl/mediabase/6576741/e81f2c3e/beste_pensioenstelsel_ter_wereld_uitgelegd.html)

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davedx
I'm also a NL resident freelancer. I've just started putting money into index
trackers as I have very little to speak of with respect to normal pensions.

Any advice? I'm mid-thirties.

~~~
wsc981
I've only started freelancing since the start of 2014, so I'm still trying to
figure things out. Some of my plans are:

\- Buying an expensive house at a nice location, which hopefully will sell for
a nice price when I'm older and also will reduce the income tax I have to pay.

\- There are certain savings options that are only taxed once you make use of
said savings. I.e.: these kinds of savings may be reduced from your income,
which will reduce income taxes you have to pay.

\- I will probably buy some stock.

The house is highest priority for me at the moment though.

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mooreds
Hip hip hooray for reality based accounting. The Dutch system may not be
perfect, but they are doing as best as can be done within the bounds of
financial uncertainty. They definitely get points for choosing pain now vs
pain later and aligning incentives more precisely.

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radmuzom
Well, Netherlands has a better minimum wage compared to the US even after
adjusting for PPP. [1]

Private insurance companies are regulated by the government and MUST offer a
core universal package including the cost of all prescription medicines. They
must do this at a fixed price for all. [2]

Taking into account these two facts, the article makes sense and provides good
reasons why the system works. Looks like progressive policies with healthy
government regulation always works better than the free market.

[1] [http://www.theatlantic.com/business/archive/2013/09/how-
amer...](http://www.theatlantic.com/business/archive/2013/09/how-americas-
minimum-wage-em-really-em-stacks-up-globally/279258/) [2]
[http://en.wikipedia.org/wiki/Healthcare_in_the_Netherlands](http://en.wikipedia.org/wiki/Healthcare_in_the_Netherlands)

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adventured
In fact the free market always works better than government regulation in
every scenario. Which is why all the countries following the modern welfare
state model are in disastrous economic condition and sinking by the day. From
Japan to Denmark to the Netherlands (the people of Denmark and the Netherlands
are two of the most indebted peoples on earth per capita) to France to Italy
to Greece to Spain to Portugal, to even the US (the world's largest welfare
state). _Nearly_ every welfare state in the world, to the degree that it is a
welfare state, is collapsing. It's also why Europe is still stuck in a
depression, with its GDP below 2006 levels, and set to stay that way for
another decade.

It was a free market for healthcare in the US that produced the greatest
healthcare system in the world, with the best doctors and hospitals, prior to
the government's first major moves to nationalize parts of the system nearly
50 years ago. It also produced by far the greatest innovation, across all
aspect of the health / medicine field.

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xorcist
If you want to argue that, at least get your facts straight first. In Europe,
the stronger welfare states of Northern Europe and Scandinavia has had much
stronger economies during the financial crisis. They have also had much better
success retraining their work force when industrial jobs has been lost to the
cheaper Asian countries.

There are many reasons why (most of) Europe is in a depression right now. One
of the important ones is the financial crisis that started in the US and
spread across the world, where European banks were invested up to their ears.
Another is the former tiger states of Ireland and Portual, where low company
taxes attracted money which was invested in a real estate bubble which popped
when the economy tanked. A third is the Euro experiment which didn't really
pan out the way politicians had hoped (to put things mildly).

So there is a whole complex of reasons for the current situation and no one
can really point out any single one as more important with any confidence. But
one of the few things we do know is that welfare states have generally fared
better in the crisis, not worse.

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ende
Just FYI, the Nordic countries had been in a process of scaling back their
welfare states considerably leading up to the financial crises and are still
struggling to achieve sustainability (except Norway which has a mountain of
oil).

It is the southern european states that have spent lavishly on behemoth
welfare states that are struggling the hardest, forced into harsh austerity as
a condition of bailout by wealthier states.

~~~
xorcist
Well, it's all relative here. The welfare state has been getting slimmer over
the past 20 years. But to understand what has changed, one needs to look at
the details. It is mainly the work loss insurances that pays out over a
shorter period out time.

Defense spending is also continously down in all the mentioned countries. But
investments in health care and education has paid off well during the same
time period, and there is no democratic mandate to lessen it.

Compared to the US it would still look like a socialist model. The southern
countries (not states) have spent a lot of money, but not necessarily on
classic social insurance systems, so I don't really think it compares. Their
main problem is that their underlying economy was much too weak for what
they've been spending.

~~~
ende
Slimmer, but also just more efficient in some respects. The Nordic countries
aren't afraid to experiment and innovate, which is perhaps the real Nordic
model.

Interesting that you take exception to my use of the word state. I generally
regard the word interchangeable with any sovereign territory outside of a US
context, as does much of the international relations field.

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qwerta
Article is just b*t. There is zero criticism, zero data, just naive adoration.
It is sad to see something like that on NY Times.

My friend worked in Netherlands for 6 years. He lost 20% of his salary, he
will get ZERO, because he is not local resident.

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radicalbyte
He should also have paid a very low tax rate - a 30% discount on taxable
income, which results in a rate closer to 20% than the 50% I pay.

See: [http://www.iamexpat.nl/expat-page/official-
issues/taxation/3...](http://www.iamexpat.nl/expat-page/official-
issues/taxation/30-ruling/what-it-is)

~~~
davedx
You're either earning EUR100k+, or your accountant sucks if you're paying
close to 50% :P

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unknownBits
Pensions are (your)savings, done by some large profitmaking organizations. Now
all the money is in there they are starting to steal it(of course), with the
excuse that the economy is in heavy weather. It is normal nowadays to see them
scraping off 10% a year. Those billions are just magically disappearing. And
all those hardworking people can say bye bye to their savings. It's more a
proof that you can never trust a large profitmaking organization taking care
of your money.

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jmartinpetersen
A lot of pension funds in Europe are trying to convert people to market rate
products, where the size of the future payouts are entirely dependent on the
market. Most usually claim it is because they can give the retirees more, when
the funds doesn't have to be so conservative with investments. In some cases,
though, it is also similar to what's seen in the US - there might not be
enough money in the coffer to honor the guaranteed interests.

~~~
jandrewrogers
The challenge for pensions in practice is that they are fundamentally either
very expensive or very risky, but almost everyone involved pretends like this
tradeoff does not exist. People hate uncertainty but few people can afford to
eliminate it to the extent they wish to. People want a pension to be
"guaranteed" but they do not want or cannot afford to pay for that guarantee
either directly or indirectly. This incentivizes both the sellers and buyers
of these pensions to engage in willful denial of the financial fundamentals of
pensions; they convince themselves the much cheaper product to be almost as
good as the real thing because they can't actually afford the real thing. The
layer of indirection between the recipient and the underlying securities makes
it that much easier to bury dodgy assumptions.

To the extent moving to defined contribution and market products eliminates
the popular fiction enabled by pensions, it is an improvement. The actual risk
is more transparent to the recipient even if they would prefer to not deal
with it.

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danielweber
_The Economist_ looked at pensions systems back in April 2011 and praised the
way Netherlands run theirs. It's not just putting lots of money in, it's also
keeping a lid on promises: if there is significant inflation, the retirees
will have to share the pain.

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MaysonL
For a more detailed description (from the viewpoint of the pension fund
association, so possibly somewhat overly favorable) see:

[http://www.pensioenfederatie.nl/Document/Publicaties/English...](http://www.pensioenfederatie.nl/Document/Publicaties/English%20publications/Nederlandse_pensioensysteem_Engelstalige_versie.pdf)

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bwb
So well thought out :)

