NETHERLANDS – Plans to repair pre-pension in the Netherlands could lead to a ‘pension catastrophe’ a leading employers’ association has warned.

In a last-minute pensions deal struck earlier in the month, the Dutch government and its social partners (unions and employers) agreed to scrap tax breaks for VUT and pre-pension premiums in 2006 (with the exception of those who are 55 years of age or older on 1 January 2005).

The FNV union now wants to ‘repair’ the abolishment of the tax break by allowing pre-pension to become part of a workers’ pension plan. Should the pension age be made flexible, that would allow workers to retire at the age of 62.

Hans van der Steen, director of employment benefits policy at the employers’ association AWVN, told the Dutch media these proposals could lead to a ‘pension catastrophe’.

“A lot of pension funds in the Netherlands are not in the best shape financially,” he said. The AWVN feared most pension funds would not be able to bear the extra financial burden of pre-pension, particularly in light of the country’s rapidly ageing population.

AWVN, which represents over 850 companies with a total of one million workers, is involved in brokering half of Holland’s 1,000 collective labour agreements. Van der Steen said AWVN would like to restrict the transitional pre-pension arrangement to 55-plussers only, with people under the age of 55 taking part in the new lifestyle savings scheme.

Recent collective labour agreements struck in the building sector and metal industry have included pre-pension at the age of 62, a development that worried the AWVN.

“This should not become the norm in the Netherlands. We should take a look at every collective labour agreement on an individual basis and see what is possible. Expectations are too high at the moment,” Van der Steen said.

The voluntary lifestyle savings scheme is to be introduced in 2006 and functions as an alternative for VUT and pre-pension. Under the scheme, Dutch workers can save up to 2.1 times their annual wages, allowing them to retire three years before the official retirement age of 65.

Although the AWVN welcomes the new scheme, it says it has got off to a “false start” by making its rules overly complicated. Furthermore, it will cost employers two billion euros a year extra in administrative costs, AWVN said.