Gamble or gold mine? This company is building a pension with bitcoin

The Bitcoin price is currently hovering around €100,000, its all-time high. Five years ago, one Bitcoin was worth over €8,000. Below you can see Bitcoin's erratic price development over the past five years.

The high price is good news for the pension fund of the employees of the Dutch crypto company Amdax, which helps consumers invest in digital currencies. Director Lucas Wensing is a firm believer in digital currencies and consciously opted for a pension plan entirely in bitcoin for his staff four years ago. According to him, the returns on bitcoin are better than investing through the stock market, as is common with traditional pension funds.

Of the 74 employees, only one opted for an 'old-fashioned' pension insurance and the rest went all-in on bitcoin.

With the Amdax pension plan, the employee pays one-third and the employer two-thirds of the pension premium. This is the same as with a regular pension fund. However, at Amdax, all employees already have their own pension fund.

Half of your contribution is used to purchase a new block of bitcoin every month. The other half is reserved for paying wealth tax in box 3. This is the key difference compared to a regular pension fund. With a regular pension fund, you pay pension contributions from your gross salary. Your accumulated savings are reserved until your retirement date, and you only pay income tax upon disbursement.

You build up your bitcoin pension fund with your net salary, and you already pay tax on it. Despite the lack of this tax benefit, Wensing claims that their bitcoin pension has generated about a 60 percent higher return over the past four years than if they had contributed the same amount to a traditional pension plan.

Chris Ewals, 52, has been head of HR at Amdax for almost four years and is one of the participants in the Bitcoin pension scheme. "The returns are going very well. I'm very satisfied with the way my current pension savings are building up."

Ewals can easily compare the returns between the two different pension plans because he built up a pension with a traditional pension fund at his previous employers. He admits that initially, he found such a personal pension fund in bitcoin "quite exciting."

The price fluctuates considerably, and you have no risk diversification because we only invest in Bitcoin. But if the price drops, you buy back in. And in the long run, the price goes up.

Ewals just hopes the bitcoin price doesn't drop significantly when he retires. Those who leave their jobs before retirement age can take their pension pot with them. They're free to do what they want with the money.

Wensing adds to his colleague's statement: "When you retire, you don't sell all your bitcoins for euros. You hold on to them and sell only the portion you need for your living expenses or to buy something nice." According to Wensing, this is for the long term. "You'll even pass this capital on to your children and grandchildren."

In the video below, RTL Z explains how to build up a traditional pension and how the Dutch pension system will change:

There are significant risks associated with such a Bitcoin-based pension. Large pension funds don't invest in individual stocks, but rather in various baskets of stocks and index trackers to hedge the risks as much as possible. Now you have only one collateral: Bitcoin.

"Moreover, crypto is quite a risky investment. The price can fluctuate enormously. You want a stable pension that doesn't go in all directions," says Jacintha van Bijnen-den Haag.

Van Bijnen, a strategic pension advisor at Aon, considers pension savings in bitcoin "a cool new initiative." However, she has reservations about such a bitcoin pension. She believes pensions are "a complex product." People need to understand the financial risks, and most people want pension security. Therefore, in her view, such a bitcoin pension fund is not suitable for the masses.

Van Bijnen expects that crypto will definitely become part of traditional pension funds' investment portfolios in the future. Not 100 percent, but "maybe 5 percent." Currently, Dutch pension funds are still hesitant to invest in crypto, as the pension market is conservative and heavily regulated.

Exelerating, a data platform for European institutional asset management, found last year that Dutch pension funds have indirectly invested over €100 million in crypto. By comparison, the combined pension pot of all Dutch citizens amounts to approximately €1.5 trillion.

Pension funds don't invest directly in digital currencies like Bitcoin, but they do hold shares in listed companies that hold a lot of Bitcoin, such as the American cryptocurrency exchange Coinbase or the payment service Block, Inc.

Dutch pension funds currently consider the cryptocurrency's price fluctuations too risky. Moreover, cryptocurrencies don't generate cash flow, unless you sell them to someone willing to pay more. Traditional pension funds normally receive income through dividends on investments, interest on bonds, and rental income from real estate.