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19 December 2017

Netherlands: governmental advisory body critical about increase of pension age

In the last decade or so, respective Dutch governments have constantly revised the statutory pension age. The system that is applied at the moment leads to an automatic rise as soon as life expectancy increases. Trade unions, backed by occupational doctors, have criticised this one-track method. The latest criticism is coming from the governmental advisory body CPB.

In a report of the governmental policy advisory body CPB, the warning is formulated that the current calculation of the statutory pension age will lead to serious financial problems among low-paid workers and self-employed. The advice comes out at a moment that the tripartite socio-economic council SER discusses the future of the country’s pension system. Observers still count the Dutch pension system among the best in the world.

The government has planned a revision in 2018 of the pension benefits system. However, there are no plans to rethink the applied mechanism for the calculation of the statutory pension age that is based on an automatic rise of the retirement age with the increase of life expectancy. The calculated increase is stemming from the statistical office life expectancy forecast five years in advance. This mechanism was introduced in 2012. The CPB says that it is time to rethink the automatic increase that is applied for the statutory pension age. With the present rhythm, this age will reach the level of 67 years and 3 months in 2022. The advice is to slow down the increase, also because the current generation of elderly has had no opportunity to anticipate a longer working life.

According to the CPB, many self-employed will not be able to retire properly because a decent pension is missing. Data from the statistical office show that they do neither participate in a pension scheme nor that most of them are insured against occupational sickness. The result is that these self-employed completely depend on the first pillar state pension. The CPB expects that they risk serious financial problems because of the increased statutory pension age.

Low-paid workers have, in general, less generous second pillar pensions; the impact of the statutory state pensions is therefore higher. They will be forced continuing working until the statutory pension age, because the flexible retirement, with reduced benefits, will lead in their case to too high deductions of their state pension. This could even result in an income position below the minimum subsistence level. There is evidence from research already that low-paid are forced to work longer than high income earners.

The speedy rise of the pension age has been criticised earlier on by the association of occupational physicians NVAB. The NVAB signals that organisations are confronted with complete new problems, because of the ageing of the workforce. According to the NVAB, the current measures to force employees keep working longer are too much focused on people with higher education.

Trade union FNV has always protested against the rigid method that was chosen. The union fears the consequences for workers that depend on the first pillar statutory state pension. The trade union has announced that it will not talk about reforming the Dutch pension system until the rise in the statutory pension age is halted.

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