Government Scraps Plan to Raise Retirement Age Faster

The government is scrapping the plan to raise the retirement age more quickly. This appears to remove a major stumbling block in the negotiations with labor unions. Minister of Social Affairs Vijlbrief hopes this step will restart talks on a broader social agreement regarding social security. Despite the government’s invitation, the planned strike actions will continue for the time being, as far as the unions are concerned.

What did the proposal entail?

The plan was to cut back on the AOW, which was expected to yield savings of over 2.7 billion euros per year. The AOW retirement age would then rise more rapidly starting in 2033 than is currently the case. The link to life expectancy would be tightened: if the average Dutch person lives one year longer, the AOW retirement age would also rise by one year. Currently, the AOW retirement age increases by eight months for every year we live longer. According to calculations, this tightening could mean that younger generations would have to work until they are 71. The minority government’s proposal immediately faced strong criticism from labor unions, employers, and even the House of Representatives.

Unions still not satisfied

Although the government is now withdrawing the proposal, concerns have not yet subsided. Unions have announced they will continue their planned actions until there is more clarity regarding other plans related to social security, including possible changes to unemployment benefits (WW) and the Work and Income (Disability) Act (WIA). Unions even describe the proposals regarding the AOW, WW, and WIA as “completely insufficient,” as well as “meager and incredibly unclear.”

The government has indicated that it will, for the time being, stick to the billions that the measures were supposed to yield, because it feels a deep responsibility to pass on a better Netherlands to future generations. The unions first want a clarifying discussion with the government to determine whether it is true that the political parties intend to stick to the social security cuts.

What does this mean for employers?

The fact that the government is temporarily withdrawing the accelerated increase in the state pension age will likely be welcomed by many employers. This is especially true in sectors where there are concerns about the employability of older workers. A further increase in the state pension age could potentially have led to more long-term absenteeism, higher inflows into the WIA (Work and Income (Capacity for Work) Act), and additional pressure on reintegration obligations.

Nevertheless, the discussion about working longer remains a prominent issue in the labor market. Employers would therefore be wise to focus now on sustainable employability, vitality policies, and strategic workforce planning.