WP 48 - Population ageing in the Netherlands: Demographic and financial arguments for a balanced approach



Population ageing in the Netherlands: Demographic and Financial arguments for a balanced approach

Nevertheless, we are justified in also looking at the cost side of AOW expenditure. It has been
suggested that expenditure can be reduced by gradually pushing up the retirement age to 67, with
the argument that life expectancy is on the increase. Of course, such raising of the retirement age
only makes sense if it leads to two years more of work participation and less of income from social
security. Van Eekelen and Olieman (2003) argue that pushing back the retirement age to 67 will lead
to greater expenditure on disability. Van Ewijk
et al. (2006, 126) seem to confirm this in practice.
For the two additional years, they predict the same low employment participation rate as at 64
years of age (10 to 11%); the non-work income of 65 and 66-year-olds will therefore continue to be
essential.

3.2 Occupational pensions and private annuities

An increasingly important share of older people’s income derives from occupational pensions and
private annuities. In accordance with these pension and annuity schemes, prior to old age, pension
contributions are deposited into capital funds using actuarial guidelines. The pension or annuity is
paid from the profits from invested savings. These revenues comprise real incomes on the one hand,
for example from interest on loans issued or rent, and (potential) appreciation on the other, for
example from shares. During the same post-1957 period in which the AOW flourished, an
impressive pension system was built up in this country (Figure 7). To a large extent the baby-boom
generation simultaneously funded the previous generation’s old-age provision via the AOW and its
own provision via occupational pension accrual.

AIAS - UvA

23




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