New government moves away from the 2019 pension compromise.

In the coalition agreement of the new Dutch minority government under Prime Minister Rob Jetten, the social-liberal D66, the conservative-liberal VVD and the Christian Democrats (CDA) have agreed to once again raise the statutory retirement age in the state pension scheme (AOW) from 2033 onwards at the same rate as life expectancy, thereby increasing it more rapidly than previously planned. In doing so, the new coalition government is deviating from key elements of the pension agreement reached in 2019 in consensus with the social partners. Furthermore, the government is planning significant cuts to benefits for the unemployed and those unable to work.

Looking back at the 2010s

Against the backdrop of demographic ageing and for fiscal reasons, the Dutch government raised the standard retirement age for the first pillar in two stages during the first half of the 2010s. Initially, in 2013, a gradual increase from 65 to 67 years by 2025 was decided. This was followed in 2015 by the introduction of an automatic one-to-one link to life expectancy. As a result, the retirement age evolved more dynamically than originally planned: the target of 67 years would have been reached significantly earlier than envisaged in the original timetable due to rising life expectancy, and would subsequently have increased beyond 67.

2019 Pension Agreement

The increase in the standard retirement age decided in 2015 was strongly criticised by insured persons and trade unions, as well as by academics. After lengthy negotiations involving the social partners and following consultation with the Social and Economic Council (Sociaal-Economische Raad, SER), the 2019 Dutch Pension Agreement was reached by consensus. The two major trade union federations, the Federatie Nederlandse Vakbeweging (FNV) and the Christelijk Nationaal Vakverbond (CNV), sought the approval of their members. These voted in favour of the compromise by a large majority (around 76 per cent in favour for the FNV and 79 per cent for the CNV).

Key elements of the pension agreement were that the retirement age was set at 66 years and 4 months up to and including 2021. In addition, the link to life expectancy was weakened: instead of a one-to-one adjustment, the retirement age has increased since 2022 by eight months for every additional year of life expectancy from 2022 onwards (i.e. a two-thirds link).

Role of the Socio-Economic Council

An important basis for the 2019 Pension Agreement was the incorporation of the expertise of the Socio-Economic Council (SER). This body advises the Dutch government and parliament on economic and social policy issues. Its members are appointed on a parity basis by employers, trade unions and the government. The SER’s report focused both on the financial sustainability of the pension system and on the social policy implications of raising the statutory retirement age.

Pension policy requires stability

Kim Putters, Chair of the SER, has criticised the government’s plan in the Committee on Social Affairs and Employment. He accused the governing parties of seeking to suddenly seeking to break a key provision of the 2019 pension agreement. He noted that this agreement had been finalised by consensus with the social partners following years of negotiations. Putters also emphasised that the two-thirds linkage had been agreed specifically for people in poor health or those in physically demanding jobs. Furthermore, he pointed out that pension policy requires stability. Following the presentation of the plans, the Jette minority government is now seeking talks with opposition parties and social partners.