Higher pension premiums could cost jobs - CPB

NETHERLANDS - The CPB, the Netherlands Bureau for Economic Policy Analysis, has issued a report into the threat posed by population ageing – and warned about the impact of higher pension premiums.

It said the threat could be countered via increased premiums, but this will have negative effects on economic growth. Possible workable alternatives will be lower indexation, or the “economisation” of pensions. According to the CPB, higher premiums could cost 80,000 jobs.

The CPB only assessed the economic effects of the second pillar of the Dutch pension system. The potential threats to the second pillar have been largely potential shocks, based on investment returns. To cope with these shocks, the CPB has assessed the effects of potential changes.

Even that the Dutch government has reiterated that the pension age will not be lifted - the CPB has been assessing the effects of a 67-year pension age in 2015. It argues that only 50,000 additional jobs would be created by raising the pension age.

According to the CPB is a higher pension age a very good instrument to counter shocks to the system. The pension subscribers however will see it as a very negative development. It adds that 55 year-olds will lose around 4,000 euros in total.

And emphasis was put on the growing issue of intra-generational solidarity and conflict. These intra-generational effects, based on positive and negative effects to the different generations of a collective system, stated in net constant values, can be large.

As an example, the CPB stated that the current coverage deficits can be countered temporarily by a substitution of the final salary arrangement by a career average, which gives more leeway for indexation deductions and lower premiums. In the case of young employees, the effect of lower premiums is preferred; overall positive effects for a 25 year old could be as high as 10,000 euros.

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