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Dutch economic bureau enters pension debate

NETHERLANDS – The CPB, the Netherlands Bureau for Economic Policy Analysis, has been the centre of a political debate in the last few days.

On October 7, the CPB published a report in which it, according to the media, attacked the current pension and VUT proposals of the government.

But the CPB – in a presentation to Parliament’s Finance Commission on October 11 - said this interpretation has been partly wrong. CPB director Henk Don and director Casper van Ewijk stated that the results of the report should not be seen as a political statement.

Both reiterated that workforce participation of ageing employees would be increased if the government decides to end the premiums on early retirement. According to the CPB, the current transition arrangements for employees 55 years and older leaves most of the current arrangements in tact.

CPB officials acknowledge however that the CPB has made some critical remarks related to the end of tax facilitation. Additionally, the CPB has not made a political statement but has based its reports on the outcome of expected economic effects of the new government proposals.

According to the CPB, the new so-called ‘levensloop’ (career) arrangements will be largely be acceptable to the higher income groups, largely to substitute pre-pension. The CPB agrees with the government that the new fiscal arrangements will support increased work participation of older employees.

However, the total effect of these measures will be minor, due to the possibility of taking out other saving schemes. In a reaction given by the FNV vice chairman Jongerius, the latter agreed with the CPB, when stating that a non-collective pre-pension/career system will cost more.

Direct effects will be largely positive for higher income groups, leaving lower income groups with nothing.
The CPB states that to support increased work participation, it is necessary not to have a premium on early retirement. If this will not anymore the case, you have an overall neutral decision making process.

In reality, with the new government proposals, there will still be a premium for 55+ workers to take early retirement. As stated by the CPB, working longer still does not mean you will get a higher pension or pre-pension in reality.

The CPB calls for the implementation of a totally neutral system. The substitution of a non-neutral to a neutral arrangement however is an issue for the social partners. The government however could build in some extra incentives to support this substitution, also for 55+.

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