Gold as a pension investment

When you think about how to arrange your pension financially, you are thinking about something that may lie decades in the future. Over such a long period, external factors such as inflation, falling interest rates and geopolitical changes can significantly reduce the purchasing power of your wealth.

Physical gold plays a different role: not necessarily to make your wealth grow by leaps and bounds, but as a protector of purchasing power that has held its value for many generations. On this page, you can read why people choose physical gold for their pension, what options there are, how much gold fits into a portfolio and how it works from a tax and practical point of view.

Reasons to buy physical gold for your retirement

Physical gold has a special place in a pension portfolio. It is a place that many other types of pension investment cannot (fully) offer. Gold owes this to three main characteristics:

1. Historical value retention is the best known. Gold is known for holding its value, and history shows why. Over the past decades, paper money has slowly lost purchasing power due to inflation, while gold has largely retained it. That is a quality you benefit from when your retirement is twenty, thirty years or more away.
2. Physical gold is also not dependent on institutions. With savings, you always depend on a bank’s interest rates and decisions, and a pension entitlement is merely a fund’s promise. Physical gold, by contrast, does not depend on any institution. This makes it a tangible asset that retains its value outside the financial system.
3. Gold also provides risk diversification. In many cases, physical gold does not move in line with the stock market, which helps spread the risk within your pension portfolio. Are your shares under pressure? Gold can help absorb the blow.

Ways to use gold as a pension investment

If you want to do ‘something’ with gold for your pension, you can choose from different ways to invest in gold. Broadly speaking, there are three options: physical gold, gold ETFs and shares in gold mining companies (mining stocks).

A gold ETF tracks the gold price. You do not own physical gold, but a share in a fund. When investing in mining stocks, you invest in companies that mine gold. Their share price depends on the gold price, but also on operations, costs and management.

With both a gold ETF and an investment in mining stocks, your return depends on an issuing party or company. If that party goes bankrupt or the company performs poorly, your investment is affected.

Physical gold does not carry this counterparty risk. You are the direct owner, the gold can be physically delivered and there is no company or fund between you and your assets. That is the difference between real gold and ‘paper gold’.

How much gold fits into a pension portfolio?

To determine how much physical gold fits into your pension portfolio, you can look at the overall composition of your investment portfolio. Research by the World Gold Council shows that a gold allocation of 2% to 10% within a diversified portfolio can improve the balance between risk and return. The exact percentage depends on the number of years until your retirement, your risk profile and the rest of your pension provision, such as your state pension, any workplace pension and private pension savings.

As you read earlier, gold is mainly a store of value rather than a growth engine. Gold is intended to preserve value and spread risk, not necessarily to increase your wealth. You can, for example, combine gold with investments that are more focused on growth, such as shares.

GoldRepublic does not provide investment advice. Discuss the most suitable percentage with an independent financial adviser.

The tax aspects of gold and pensions

From a tax perspective, physical investment gold has a major advantage: it is exempt from VAT throughout the EU, provided it meets the purity requirements. This means a purity of at least 995/1000 for bars and at least 900/1000 for coins. You therefore pay no VAT when you buy investment gold that meets these requirements.

If you are a Dutch tax resident and hold physical gold privately, it falls under Box 3, the Dutch tax on savings and investments, and is taxed on the basis of a deemed return. Unlike an annuity or a locked-in pension product, physical gold offers no tax deduction on purchase. In return, you have full flexibility: your gold is available at any time.

For entrepreneurs, there is another route. Through a company, such as a Dutch BV, it is possible to hold physical gold within the business. You can read more about this on our page about buying gold for business.

GoldRepublic does not provide tax advice. Have your situation assessed by a tax adviser or financial adviser.