Mandatory pension accrual of entrepreneurs: a comparison between the Netherlands and Iceland

There are several important differences between the systems in the Netherlands and in Iceland.  The first pillar is means tested in Iceland and not in the Netherlands; the second pillar mandatory in Iceland but not in the Netherlands and the self-employed end up having a pension because they  have to calculate own wages for tax purposes and pay a pension contribution on that basis. The people who rely on the first pillar and have inadequate private pension are those, for example, who spent large portions of their lives in other countries and did not accrue pension rights and the people who were out of the labor force for long periods  due to long-term illness.

The goals of this paper is to describe the systems in NL and Iceland, compare them from a legal, tax and economic perspective in order to come to recommendations for either the Netherlands, Iceland or both. For the Netherlands the recommendation are aimed at solving the problem of inadequate pensions for entrepreneurs and employee who do not participate in a pension plan.

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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