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The Dutch Pension Plan (nytimes.com)
94 points by luu on Oct 13, 2014 | hide | past | web | favorite | 46 comments

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.

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...

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.

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.

Find a competent tax guy that understands both US and NL tax law. I can recommend someone that I used and liked. Msg me if interested.

The Belastingdienst doesn't recognize Roth IRA's as retirement accounts, but one trick is to own an REIT ETF in it which they'll count as foreign real estate which is non-taxable. There are many tricks, find a competent guy who can help you. Don't try and do it yourself.

They're not comparing Dutch pensions to your defined-contribution plan, but to American defined-benefit pensions, which you don't have. Why not? Because it's essentially illegal for anyone to offer one to you without funding it like the Dutch do...except for government pensions.

Personally, I would prefer, as you do, my own defined-contribution 401K, which I invest heavily into low-cost index funds. But I'd much rather have a Dutch-accounted, actually paid for pension instead of a Calpers-like pension where I have an absolute claim...to money that will never actually get put into the system. The Dutch way is a hell of a lot less bad.

I read the article again and I think you're right.

I think there's some linguistic confusion here. The Dutch word pensioen regularly gets translated into 'retirement account', or somesuch. Whereas, and as you state, there are specific varieties of these in both the NL and USA.

As an American who speaks Dutch and worked in the NL for a long time, I regularly played this language game when talking about retirement. Unfortunately TFA wasn't really clear to me WRT to these distinctions. It could have been more explicit.

15% upfront forever, or 2% fund total per year like in the UK?

It was 15% upfront, then typical mutual fund charges of 1-2% per year. Still terrible compared to Vanguard.

Upfront PLUS yearly 1-2%? Ouch.

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.

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... [2] http://en.wikipedia.org/wiki/Healthcare_in_the_Netherlands

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.

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.

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.

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.

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.

> Looks like progressive policies with healthy government regulation always works better than the free market.

Can you elaborate? Since the US is far from a free market when it comes to healthcare I'm not sure how you are making that comparison...

I am doubtful whether the free market exists anywhere in the world (please correct me if I am wrong). My theory is that whenever it tends to exist, a few corrupt players (government or private) will tend to game the system and take all the riches for themselves and the market will not be free any more. That is because the Econ 101 which free market theorists tend to talk about does not take into account human psychology which is far more important.

The alternative is a shared sense of social well-being(not socialism or communism) with healthy government intervention, rather than individualism which Americans seem to be fond of. I would accept a lower GDP where people are happy (subjective) over the American way of life any day.

Then why do free market systems produce by far the greatest standard of living as compared to any other system? To the degree that countries use the free market, they're prosperous, it's that simple.

If you were right, Hong Kong would have been impossible.

People like to reference Scandinavia. Well, Swedes in the US possess a higher standard of living than Swedes living in Sweden do.

And Sweden's modern boom the last two decades was produced by a shift toward the free market, rather than away from it. Previously it was mired in a long-term stagnation brought on by heavy welfare state policies.

The free market version of the Untied States produced the first, and by far the largest, true middle class in world history. There isn't even a close second. Prior to the the US abandoning the free market system 40 years ago, it was basically at the top of the pile in nearly every metric, from education to savings to growth to upward mobility to standard of living; along with an amazing college system that was affordable, and an affordable healthcare system that was the best in the world.

If the welfare state worked, it wouldn't be collapsing rapidly all around the planet. The debt piled up faking prosperity under the welfare state system has begun to come due, and all those gains that were pulled forward to pretend the system worked, are eroding.

I disagree with many statements, but I want to focus on two:

> why do free market systems produce by far the greatest standard of living as compared to any other system

What other system do you mean? I don't see two systems to choose from. Every wealthy nation and most poor ones have a 'free market' system with some social welfare programs. The question is what degree of social welfare do we want to provide?

> The debt piled up faking prosperity under the welfare state system has begun to come due

In fact Western economies grew enormously in the last 40 years. The U.S.'s recent debt and economic problems are because of reckless governance:

When Bill Clinton left office the government was running a surplus and the economy was growing. Under the Bush administration, the Republicans (and the blame falls heavily on them this time, there's no point in being falsely even-handed):

* Cut revenue (taxes) significantly

* Greatly increased costs unnecessarily by invading Iraq

* Greatly increased costs unnecessarily by failing to regulate the financial sector, resulting in the worst economic catastrophe since WWII. This greatly impacted revenue (reduced economic activity reduces tax receipts) and expenses (increasing demand for social welfare, and bailing out critical industries).

* Malpractice in governance, attempting even to default on the credit of the United States to score a political point!

Balancing the budget with excellent economic performance and social welfare policies was and is possible. We did it under Clinton. If you greatly both cut revenue and increase costs, and conduct malpractice in governance, then yes you will have a lot of debt and other problems.

Really? adventured says the US left the free-market system forty years ago and you reply with criticism against Bush?

I agree that there are no free market systems anywhere and that corruption is a huge problem. That's universal and not just related to healthcare.

I would say that another alternative would be full transparency in costs and prices, that way the public can understand what they are paying for. One example is an Oklahoma City surgery center showing their prices online for all to see. http://kfor.com/2013/07/08/okc-hospital-posting-surgery-pric...

Ultimately I have no faith in what the US is doing, mainly because it's the same problem all around: the government get's involved in a negative way, then years later claims it's the only thing to fix the problem by becoming more involved. Yet it never actually address's the issues from the beginning.

That the parent was downvoted (and reading some other posts) shows what I unfortunately have come to expect, which is a low standard of discussion on HN about these issues. There is an aggressive negative reaction to anything that challenges the radical libertarian orthodoxy by suggesting that a social welfare program, especially a European one, could work well.

It's not intellectually honest and not valuable to discussion, and we should raise our standards. I expect that almost everyone reading HN understands the following: If you've drawn a conclusion before seeing the facts, you aren't open to new ones, and you think a complex issue is black and white, you're acting dumb. Also, it blocks innovation when new ideas are evaluated based on their adherence to prior orthodoxies. Finally, knee-jerk reactions have no value. Let's use the same intellectual skills we apply to technology to address other issues too.

While I certainly won't take issue with your last paragraph, aren't you just taking exception to the fact that people disagree with you? You don't really know why the people who down-voted the parent comment did so, and are projecting a certain viewpoint upon those folks. That doesn't seem terribly honest or valuable either. Of course, you could very well be right, but I'm guessing if the down-voting were of an opinion you did not agree with, there'd be less of this "we should raise our standards" talk.

For my part, I would say that the parent made a couple of statements which were weakly-linked to the content of the article, and then ended it with what sounded like a victory lap ("Looks like progressive policies with healthy government regulation always works better than the free market."), which sounded kind of smug given that there seemed to be a few steps of the proof missing.

As an American living in the Netherlands, I've thought quite a bit about the different approaches taken to social welfare here and at home. If anything, my experiences have left me with much less certainty about which strategy is "best". They seem to optimise for different value systems.

> aren't you just taking exception to the fact that people disagree with you? You don't really know why the people who down-voted the parent comment did so, and are projecting a certain viewpoint upon those folks. ... I'm guessing if the down-voting were of an opinion you did not agree with, there'd be less of this "we should raise our standards" talk.

I'm not and your guess is wrong.

First, do they disagree with me? What is my opinion? Aren't you doing what you accuse me of?

You're right that I don't know the reasons for the individual downvotes. However I'm confident in the pattern I've observed in this discussion and others on HN. I think the aggressive, dogmatic responses, the lack of value in many comments, and the voting patterns (including for my comment, for which -2 is way overboard) are obvious.

If you care, my opinion is that I don't know enough about the subject to form one, that without a proposed pension system there is nothing to have an opinion about (i.e., it's too hypothetical), and especially that it would be valuable to me and to our society to have intelligent discussion about it. The signal-to-noise ratio of the libertarian orthodoxy makes it difficult to find any valuable contribution from them, and their shouting down of anyone who disagrees also doesn't help. They may have good points in policy, but the standard of discussion needs to be raised.

Uh huh. Pro tip: using the phrase "radical libertarian orthodoxy" is a strong indicator that perhaps you're not really interested in even-handedness.

sipior doesn't know me or speak for me. I refer anyone interested in my opinions and thoughts to my own posts.

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.

Potentially of interest to your friend, depending on their country of citizenship or primary residence over their working career: it is possible that there exists a totalization agreement between that country and the Netherlands which will count his years in the Netherlands system for the purpose of his public pension.

A page on the subject, specific to the US, for purpose of illustration:


If he had what Dutch people call a pension, it's still his, and he can still collect it. We're not talking about money given out by the Dutch government at retirement. By pension, we're talking about investments made during the lifetime of your employment that the employee owns. If he made contributions to a Dutch pension he still owns it. That's property, and has nothing to do with residency.

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...

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

Your friend is not well-informed.

If he is a European citizen as you indicate (more exactly, if he is a European resident, as for outside Europe, I have no clue), he will be able to transfer his annuity to his country of residence.

As far as I know, he can do it now or he can do it a few years before going into retirement.

Source : I'm exactly in the same situation and asked at the services of my current country of residence (France)

Should you design a pension system for the people retiring there, or the half of percent of people who are visitors?

No, but why to make it compulsory for 'visitors'?

He is EU resident. Imagine in US you would be forced to contribute to state pension, but would get your money only if you work for 30 years in single state. Moving from California to Texas == zero pension.

Dutch here. Everybody has to pay if you work. This goes for pensions, this goes for healthcare, this goes for social security. It only works if everybody who works, contributes.

I do however find it strange that he's not entitled to a pension he paid for. I guess the EU isn't ready for that yet.

He is actually entitled to it. You can always arrange for a buy-out (uitkopen); you're still liable for income tax if you contributed pre-tax on your pension.

Did he not know he was going to work in the Netherlands?

I'm open to the idea that the European countries are overtaxing its citizens, but if someone moves there, I say they're getting exactly what was advertised.

He was planning to stay long-term, but had to change his job.

Just saying this system is not as super as it sounds.

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.

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.

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.

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.

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


So well thought out :)

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