NETHERLANDS - The Dutch government, together with representatives of employer and employee organisations, today signed an agreement to radically reform the Dutch pension system.

The new pension agreement was signed despite strong resistance from FNV Bondgenoten, the largest trade union with approximately half a million members, and will see pensionable age rise by two years by 2025.
 
Under the agreement, the pensionable age will be raised to 66 by 2020 and to 67 by 2025. Employees will be free to choose whether they want to retire at 65 or continue to work, however, whoever chooses to retire before the standard pension age will lose 6.5% of his or her first pillar pension (AOW) for each year of early retirement.

First pillar pension benefits will be raised an extra 0.6% annually, amounting to indexation in line with real earned wages, which was a major demand of umbrella union FNV.

Social affairs and labour minister Henk Kamp (pictured) further annouced the introduction of a tax break for seniors, amounting to a windfall of €300 annually.

FNV union leader Agnes Jongerius said she was "very pleased with this income-dependent senior tax discount, as it allows people to still retire at 65 and receive adequate pension benefits".

Both Kamp and Jongerius stressed that people will be given freedom of choice with regards to their retirement age. Jongerius considered the flexibility "an important win".

In second pillar pensions, the exact degree of certainty offered and the amount of uncertainty allowed to help realise indexation ambitions, will be determined by each plan individually.
 
According to Jongerius, "pension funds will be free to choose which balance they wish to strike" between offering guaranteed benefits on one hand, and the pursuit of indexation ambitions on the other hand.

Among other advantages of the agreement, she specifically mentioned that fiscal restrictions on retirement savings are off the table.

Minister Kamp promised to change the law as needed to allow for the agreed changes to the pension system, including "improving, and possibly expanding, the financial framework FTK."

Additionally, he said the government would study the legal and technical implications of the reforms, including examining how previously accrued rights could be absorbed into the new system.

Bernard Wientjes, chairman of employer organisation VNO-NCW, stressed that employer contributions to pension plans have reached their upper limit and that under the new agreement pension benefits will no longer be guaranteed.

In the event of a further financial crisis, the new pension deal does not compel companies to offer their pension funds financial support. However, Wientjes noted that companies now promised to continue to contributions "even when times are good - so going forward there will be no more premium restituions or contribution holidays".

All parties further pledged to improving labour market participation by seniors.

The new pension deal still has to be approved by union members. Although Jongerius stressed she was pleased with the agreement, FNV's constituent union FNV Bondgenoten may yet refuse to accept the deal by advising its members to vote against the agreement.

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