Total value pension fund assets in the Netherlands 2008-2023
The Netherlands had among the highest assets under management (AUM) of pension funds within the EU-27 in 2023. Dutch pension funds had roughly 3.37 trillion euros worth of total assets, 2023. It is compulsory in the Netherlands to participate in a pension fund when you are employed. Part of one’s salary is transferred to a pension fund each month. These payments are used to invest further in order to provide a future supplement to the state pension (called AOW), a base income for any person who lives or works in the Netherlands after the employee retires. Because of this system, pension funds make up the majority of the financial assets of households in the country.
Financial health of pension funds is important to the Netherlands
Simply put, the Dutch pension system forces citizens to set money aside for later. The reliance on pension funds does mean, however, that authorities must keep a close eye that the funds have enough financial reserves to actually pay the retirees. An important way of measuring this is the so-called policy funding ratio (in Dutch: dekkingsgraad), which compares the assets from a pension fund against its liabilities. Should the index (which is based on the last 12 months) reach 100 percent, the fund is able to pay all the pensions. Should the ratio become too low, however, funds are forced to cut in their pay-outs. From 2020, the ratio all pension funds have to reach is set at 104 percent.
Pension funds rank among the highest investors
As all employees participate, Dutch pension funds have a lot of money to invest with. In 2020, total investments amounted to approximately 2.1 trillion U.S. dollars. The funds are free to choose what projects to invest in: this can range from mortgages to infrastructure projects to economic projects within the Netherlands or prospects in other countries. For example, the investments from Dutch pension funds in hedge funds reached a value of 25.1 billion euros in the third quarter of 2021.
