DCregelingen

DCregelingen, short for defined-contribution regimes, are a type of pension arrangement used in the Netherlands and in other pension systems. In a DCregeling the pension benefits at retirement are not guaranteed. Instead, the contributions are fixed and the eventual pension depends on the investment performance of the accumulated capital and the chosen payout method.

How it works: an employer, sometimes together with the employee, contributes a fixed amount or percentage of salary into an individual account or a collective pension pot. The money is invested and the value of the pension capital evolves with investment returns minus costs. At retirement, the capital can be used to purchase an annuity from an insurer, taken as a lump sum, or drawn as a flexible income, depending on the product and regulations. The selected payout option influences the level and stability of future income.

Key characteristics include that the investment risk and longevity risk are borne by the participant, not the employer, and that benefits are not predetermined. The value of the pension pot depends on market performance, life expectancy, inflation, and costs. DCregelingen can be offered as collective arrangements within a company or as individual accounts and are typically managed by pension funds or life insurers under Dutch pension and financial regulations.

In contrast to defined-benefit (DB) schemes, where a specific pension amount is promised, DCregelingen provide transparency about contributions and costs but leave retirement income contingent on investment outcomes and product choices. Regulation is through the Pensioenwet and oversight by relevant Dutch supervisory authorities.