Would a government bond for individuals be a good idea for the Netherlands?

Published on: 1 March 2024

Current issues related to economy, (responsible) investment, pension and income: every week an expert from APG gives a clear answer to the question of the week. This time Anke Cornelisse, portfolio manager for government bonds, on the question of whether the so-called “State Note" (or "staatsbon" as it is known in Belgium) might also be a good idea for the Netherlands.

Dutch banks published hefty profit figures earlier this year. At the same time, they offer savers interest rates for which the word “thrifty” would not be out of place. The Belgian government decided in 2023 to offer savers an additional choice and came up with the “State Note”, a government bond for individuals. You put in a minimum of 100 euros and get it back at maturity, with a net interest rate of 2.81 percent on top. The launch of this State Note last summer was a huge success. Belgian banks saw individuals’ savings disappear from their coffers and go to these bonds. This week, Brussels launched a second round of the State Note. Not only Belgium, but also countries like Italy and Portugal issue government bonds intended for individuals, says Cornelisse. Would this be a good idea for the Netherlands too?


The difference between the well-known government bond and the State Note concept is that the latter is intended exclusively for private individuals. “As a private individual, you can also buy part of a government bond, but you have to do that through a bank or a platform like DeGiro or Saxo, which charge commission for this. The Belgian government bond, on the other hand, you buy directly from the government’s debt manager.”


The Dutch government can raise enough money from investors due to its high credit rating, and does not need the money from individuals, Cornelisse continued. “In fact, the Belgian government announced that it has not yet had to use the 22 billion it raised with the State Note in August, and that these euros are still in the state coffers.”

So why would the Netherlands lend to private individuals? “I doubt that the Dutch government would pay a lower interest rate to its own citizens than on its other bonds, and thus benefit greatly itself. It is somewhat cheaper to raise money from individuals, however. After all, you don’t need a group of banks supervising the issuance of the State Note on the financial market, like you do for a standard bond. In addition, a State Note diversifies your investor base. When different types of investors, such as pension funds, hedge funds and therefore individuals, buy up your loans, you are less dependent on any one of those parties. But probably the main motive would be political in nature: ensuring that Dutch consumers can benefit from higher interest rates than you get on a savings account at, say, ING, ABN AMRO or Rabobank.”

Banks spoke of unfair competition and criticized the special tax rule

Dutch people can also turn to a foreign savings or deposit account for higher interest rates, but Cornelisse says many people still consider such a move risky. “Investing in a government bond issued by the Dutch government sounds more familiar then. To facilitate that switch, it is important for the interest rate on a government bond to be significantly higher than that on the average savings account.”



The question is why the Netherlands does not (yet) have a State Note. Cornelisse tells us that the government did look into this. “There are currently no plans to introduce a Dutch State Note. The reason for this is unknown. I assume it is mainly for practical reasons. In our current tax system, an individual in the Netherlands pays 36 percent tax on the return on assets in 2024. The Tax Authority assumes that a return of over 6 percent is achieved on all investments: the so-called notional return. That is much higher than the actual return on Dutch government bonds, which is around 2.5 percent. On savings rates, that notional return is less than 1 percent.

If the Dutch government wants its citizens to enjoy higher interest rates, special tax rules should be made for the government bond. Belgium did just that and reduced the tax rate on the return on the State Note from 30 percent to 15 percent. Banks spoke of unfair competition and criticized this measure. Belgian politicians eventually proved them right, reversing this tax advantage. Without that measure, however, the net return on a State Note is not much different from the interest rate on a regular Belgian savings account. As a result, the second issue of the State Note is a lot less popular than the first, and is expected to raise around 600 million euros this time instead of 22 billion.”