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IPE special report May 2018

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Dutch pensioners better off than before

NETHERLANDS – The average Dutch pensioner is becoming wealthier than previously, according to a Dutch Central Statistical Office (CBS) report.

The average income of the 65-plus age group was 4% higher than in 2004 than in 2000, the report says. By contrast, those still in work have seen smaller increases in their income or even a fall in purchasing power of their salaries.

The CBS says that these trends have led to a narrowing of the income gap between the elderly and those of working age.

In 2004, the average income for pensioners was €23,000, which was 23% less than the average income of the under-65s. However, when adjusted for factors such as the number of other people in the same household, the disparity was much less -- an average of 6%. The difference in 2000 was 8%.

The trend was previously identified by the ministry of social affairs in 2001.

The CBS said it expects the trend to continue during the coming years as the average income of pensioners increases faster than average salaries.

The main reason is the relatively high levels of second and third pillar pension agreements for the current generation of employees who will be retiring in future.

These rising payments have given rise to calls for payments from the first pillar, or state, pension – the AOW – to be taxed.

Vincent Thio, the author of the social affairs ministry report, had proposed in the 1990s that because of these high levels of second and third pillar provision, pensioners whose total pension income exceeds a certain ceiling should be taxed on their AOW pension payments.

This idea had previously been proposed by the Social Economic Council (SER), which advise the government. However, the current right-of-centre government has not followed this advice.

However, the opposition Labour Party (PvdA) has indicated that it would support a tax on the AOW.

Employees pay AOW contributions as a tax on earnings.

During the 1990s, the government decided that AOW contributions should not exceed 18% of a salary, but this level has not yet been reached.






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