NETHERLANDS – Dutch government plans to dissuade early retirement have been met with what one observer termed “astonishment”.

The proposals centre on raising the taxation of the widely used VUT early-retirement system. According to reports in the Dutch press this week, workers who take up VUT to stop work before retirement age would have to pay a large "advance levy" in tax.

Although the plans are not yet finalised, “everyone we have spoken to says the plans are really true,” says Jan Kars, practice leader for retirement financial management at consulting firm Hewitt/Heijnis & Koelman in Amsterdam.

He said there could be higher administration costs for pension funds as a result. The proposals would certainly mean higher costs for beneficiaries.

“The government wants to do this to make the average employee work longer,” Kars said. The reaction to the moves has been one of “astonishment” he said. But the change is “quite logical” in the light of the demographic problems facing the Netherlands. “We really have to save money in the Netherlands.”

The government’s final proposals are due to be released in the third week of September. Dutch union confederation the FNV dubbed the plan "idiotic" and warned it would go to court to fight it.