The Cabinet’s decision to raise the AOW retirement age (AOW = Algemene Ouderdomswet; General Old Age Pensions Act) to 67 has touched a nerve. As a result, for the past few months the SER (Sociaal-Economische Raad; Social and Economic Council) has been pondering the alternatives. On Sunday it was announced that the outlines of a SER agreement were now known. The unions would after all agree to a gradual increase in the retirement age to 67.
As a result, the SER is making the best of a bad job, in the opinion of the Groningen professor of Social Security Law Gijsbert Vonk. Other alternatives that were considered, such as making exceptions for physically demanding professions or linking the AOW to employment history, would have affected the spirit of the AOW too much. ‘That would have been a real shame, because despite being over 50 years old, the AOW is still a very modern facility.’
The AOW does not distinguish between employees, the self-employed and non-actives. When you think about it, that’s very progressive, in Vonk’s opinion. In other social security regulations, employees are better protected due to historical reasons. However, the preferential treatment that employees get compared to the self-employed is now passé. The most vulnerable people now are self-employed people with no staff. We now have nearly half a million of them.
Non-actives also have their noses in the same AOW trough. However, that’s not to say that the AOW is based on the right to be lazy. Vonk: ‘One person may not have worked for several years because of care commitments, someone else because they were ill, but the next person may have spent three years hanging around a squat doing nothing. The AOW abstracts from such individual backgrounds.’ This keeps the law simple.
As a result of the broad basis, the pension has to remain sober. The AOW only provides the social minimum. Everyone receives the same pension. Thus the law sends out the signal that citizens are in charge of that part of their pension that exceeds the minimum part. In practice, pension agreements to supplement the AOW are made between employers and employees. These are the supplementary, collective pensions organized per branch or per enterprise. According to Vonk, we are going to be hearing the signal that the government can only help protect us to a limited extent more and more often, particularly in health care. Rising costs due to an ageing population will mean that somewhere a line will have to be drawn for the degree of social protection.
Thanks to its simplicity, the AOW is also a very practical tool. Fraud is virtually impossible and the SVB (Sociale Verzekeringsbank; Social Insurance Bank), which has to implement it, has scored 10 out of 10 on fairness for years. These characteristics mean that the regulation is still up-to-date. ‘You can discern the contours of a basic income in it. However, such a construction needs constantly to be explained.’
Vonk acknowledges that increasing the AOW age sends out a psychological signal that you are not washed up once you reach 65. If politics simply wants to keep us at work longer, then the AOW age should be increased if necessary. Vonk is far more concerned about some of the alternatives being discussed in the SER. In his opinion you can’t make an exception for physically demanding work. ‘Physical work has become much less of a strain. Stress is the new danger. But how can you convert something like that into a regulation? It’s a very individual thing.’ The option you would then end up with would link the AOW to the number of years a person has worked. That has major drawbacks, according to Vonk. It would be extremely complicated to assess all those insurance periods. ‘You’d have the most problems with claims from citizens who think that their individual situations should be taken into account: study, illness, pregnancy, incapacity for work, voluntary work. Every situation would have to have a different type of exception.’ According to Vonk, such a measure would sound the death knell for the AOW as a national insurance scheme. ‘It would be like inventing the car and then still deciding to travel by horse and cart.’
If the SER approves a gradual increase of the retirement age to 67, the Cabinet would get what it wants. However, by choosing this option the Council is going for the best of a bad lot, thinks Vonk. However, the SER’s vision includes the possibility of retiring at 65 years of age with a smaller pension. This is perhaps not so great for people who have been in physically demanding professions, but for society as a whole, the AOW will remain intact in its current form from the age of 67. That would be a great service to society by the SER, in Vonk’s opinion.
According to Vonk, increasing the retirement age should be seen in a different light. ‘At the moment no-one is raising any problems about unfair treatment of certain groups when you reach 65, so why would we suddenly do so at 67?’ In Vonk’s opinion, it would be better to provide the tailored solutions that society seems to be crying out for within the field of supplementary pensions. It would then be perfectly possible for a construction company to have a regulation for early retirement but for the banking world not to. ‘In the overall pension system, the AOW is the hard, unchangeable core. The power of the AOW lies in the complete assurance of a minimum pension from a certain age. Supplementary pensions are more differentiated and can thus be much more flexible in accommodating special needs or wishes.’
Prof. G.J. Vonk
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