A) Regular Pension System
Pension coverage has legal, tax, actuarial and product aspects. Thus the coverage can differ substantially in each country. Nevertheless, most countries have a pension system which consists of the following three Pillars:
Pillar 1: State Pensions
Pillar 2: Occupational Pensions
Pillar 3: Private Pensions/Annuities
B) International Organization Pension System
Worldwide there are many international organizations. In Holland there are 40 international organizations registered. Well known institutions who often have their legal basis due to the United Nations, NATO or European Union.
Expats who work for these institutions often face a special kind of pension coverage. Due to the special and often unique legal identity of each institution, the mentioned three Pillar coverage system often does not apply.
Often there is no distinction between the three Pillars. Often the tax situation is also very different from the national tax legislation and complex.
Often the occupational pension coverage has several very strict requirements which for a standard corporate pension system are highly unusual. But which is quite normal for such international plans.
C) Conclusion Expat Pension Planning
Expats who work for international organizations should be aware of the exact implications of this special situation on their pension coverage. The translation of their wishes into optimal coverage deserves extra care.
More in particular they should pay special attention to:
- What might threaten or degrade their pension coverage?
- What are the possibilities to optimize their total pension situation?
- Is transfer of value smart in order to safeguard coverage or is the risk too high?
- Is it possible and if so attractive to acquire additional state pension claims from the previous residing country?
- Is there a difference in offered coverage as more limited Social Benefit or more extensive Pension? Often especially relevant regarding Next of Kin and Disability coverage.
- What is the exact tax treatment of the pension benefits now and in the pay-out phase?
- Is international double taxation of pension benefits prevented and if so is it handled in the best way possible?
We are familiar with these issues. If you might have questions, feel free to contact us.