Flexible pension withdrawal


Freedom of choice is a key concept in the current pension debate. Among other things, it concerns the question whether participants in collective benefit schemes should be given the opportunity to pay fewer contributions for a prolonged period of time or whether they should withdraw some of their accrued pension rights when they reach retirement age (Ministry of Social Affairs and Employment, 2016). This would provide a better link-up with the preferences of participants who regard the compulsory nature of pension contributions as increasingly restrictive (Bart et al., 2016). At the same time, the fact that these preferences are becoming increasingly diverse is taken into account. The option to withdraw some of the pension benefit early may also have disadvantages (De Beer et al., 2014). A bigger choice of freedom may result in people making the wrong choices. Also, flexible pension withdrawal may be in conflict with the solidarity in defined benefit schemes.


This project aims to achieve a broad assessment of flexible pension withdrawal in general. This includes the lump sum that can be withdrawn when reaching retirement age, the contribution discount during the accrual stage and various versions of high-low schemes. First, we will discuss the costs and benefits of flexible pension withdrawal. We will then talk about the consequences of various methods and we will analyze how we could implement those different methods in practice.


We will pay attention to the following aspects:

  • the benefits for participants in terms of freedom of choice
  • the costs of wrong decisions made by participants
  • the number of participants who would like to make use of flexible pension withdrawal

Based on these three aspects, we will make an assessment of the net gain in prosperity for participants in flexible pension withdrawal. As the Netherlands has little experience and the material from surveys is relatively limited, this assessment is of an indicative nature only. The calculation focuses on the direct effects; possible effects on the government budget and the financial position of funds are disregarded.

  • the solidarity within pension schemes and the financial position of pension funds (coverage ratio)
  • the role of flexible pension withdrawal in the wider context of a level playing field between employees in paid employment and sole traders, also paying attention to taxation
  • the consequences for participants in the event of an accumulation of choices (such as in the case of early pension withdraw due to the old-age pension shortfall in combination with a high-low scheme).


We will discuss the following aspects:

  • the consequences of certain choices for subsequent pension benefits

We will identify and list how different choices affect the pension benefit at a later stage or the course of pensions in time. The calculations also deal with the uncertainties attached to the pension benefit and the consequences of applying a different projection interest rate other than the risk-free interest rate.

  • fiscal treatment of various methods
  • assistance provided by pension funds to participants when they have to make choices
  • which methods are preferred on the basis of the analysis?


We explicitly want to link up with previous studies in this field. Among other things, this concerns the literature in the field of behavioral economics about choice-related stress and irrational choices by people. It also concerns the experiences gained in other countries with regard to flexible pension withdrawals. The Netherlands can learn from a host of best practices in countries that also play a relatively big role for capital-hedged employees’ pensions, including Australia, Chile, the United Kingdom, Switzerland and the Scandinavian countries (Lever et al., 2015). We will also link up with previous calculations in this field (Westerhout, 2013; Bonenkamp et al., 2015; Bovenberg et al., 2016). Furthermore, the fiscal aspects will be placed in a wider context (Starink et al., 2016).

Red paper here.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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