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

In this paper we compare the pension systems in the Netherlands and Iceland from a legal, tax and economic perspective. The numbers of workers (both employees and entrepreneurs) in the Netherlands who accrue no, or insufficient, pension has increased in recent years. This in contrast with Iceland, where such a problem does not exist, mainly due to the mandatory pension accrual for all workers.

This paper outlines the relevant differences between the Dutch and Icelandic pension systems and outlines possibilities to increase the number of entrepreneurs accruing pensions. In the Netherlands several proposals have been made to increase the pension accrual of entrepreneurs, such as auto-enrollment with opting-out and voluntary participation in pillar two schemes. However, Dutch politicians are to date not yet in favor of introducing mandatory pension accrual for all workers, like in Iceland. The Icelandic pension system has several other aspects that can contribute to increase the number of entrepreneurs that accrue pensions. For example, a mandatory matching contribution from the employer or client in the third pillar if the entrepreneur chooses to use a third pillar pension product, a free choice of pension provider and/or different opportunities to withdraw accumulated pension capital during life.