NETHERLANDS - Dutch pensioners will increasingly have to contribute to the financing of the state pension AOW if present legislation is left unchanged, according to a study just released.
Although the AOW - payable from the age of 65 - is financed by workers through a pay-as-you-go system, a shortfall in income from premiums forced the government to increase its contribution from just over 10% in 2002 to over 30% by last year, the social security organization SVB said.
Moreover, public finances will be funding 50% of the total contributions by 2038 - when population ageing will reach its peak - unless funding policy on The Netherlands' state pensions system is updated, according to SVB.
Pensioners are exempt from paying the AOW premiums of 17.9% but still contribute to public funding through taxes.
The cause of the increased shortfall is not only the growing number of pensioners, but also because the AOW indexation is now linked to the minimum wages, which follow the general salary rise, agreed in collective labour agreements (CAOs), SVB researchers explained.
That said, a lower proportion of the premiums has actually been allocated to AOW funding, officials found.
According to researchers, the total income from workers' contributions to the state pension has decreased considerably since 2005, and is expected to be lower this year than in 2002.
At present, 9%, or 243,000, of Dutch pensioners who receive the AOW live abroad. Over 50% are based in the EU, of which 15% live in Spain, 13% live in Germany and 12% live in Belgium.