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Victims or winners?

Your political perspective may well predict the way you view the self-employed. For instance, do you see them as the wealth creators of the future who should get the maximum possible incentive from the tax code without state hand-holding? Or do you look at the Uber-drivers and freelance delivery riders of this world and see vulnerable potential victims who need to be protected from the pressures of the so-called ‘gig’ economy’?

This is a live debate in the Netherlands with regard to the pensions (or lack of them) of the million-plus group of self-employed, or zzp’ers in Dutch. Most Dutch people make compulsory workplace pension contributions but this is regulated on a sector-by-sector basis. As the self-employed fall outside these agreements they must make their own supplementary arrangements. 

In the Netherlands, as elsewhere, the self-employed do not save enough for their retirement. If they do not make provision they can, for instance, undercut larger corporate competitors making pension contributions on behalf of their employees. This is contentious, as these contributions can amount to more than 20% of salary, giving the self-employed an advantage – at least in the short term.

Where the self-employed do provide for their retirement, they are confined to retail pension products without the risk-sharing characteristics of occupational funds, resulting in higher costs and potentially worse outcomes. Some on the left argue that the self-employed also risk ‘choice stress’ because of the plethora of products available. 

Many people become self-employed after a period of regular employment. Because the young are generally disadvantaged by the collective nature of the Dutch DB system, the self-employed can also miss out because they do not accrue the pension rights that they would have if they stayed on for longer as employees.

Leaving aside whether you think the state should be more or less paternalistic on behalf of the self-employed, it is relatively uncontentious to suggest that it should at least be easier for them to provide for their retirement.

Political parties have differing stances on the self-employed: the Socialists want to create a national pension fund for them. The centre-left PvdA wants compulsory contributions, and the Christian Democrats propose a minimum saving rate to benefit from tax breaks. The centrist D66 party prefers flexibility.

Erik Lutjens, professor of pensions law at VU University Amsterdam and a pensions lawyer at DLA Piper, has suggested opening second-pillar funds and PPIs to the self-employed. That might be one of the least contentious options after the election when the politicians get round to negotiating these issues for real.

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