I think retirement is a good idea, whereby I understand the collective “savings” for a certain financial future.
The problem with retirement now (2019) is that both the collective component (collectively) and the component security are under pressure.
The idea of retirement was (and is) that people share lusts and burdens.By scale advantage can be cheaply “spared” for the pension. The pension was set up at a time when many people worked with an employer for a very long period, sometimes their entire working life. That’s a bit of a family, and then you also care for each other.
People who are now starting work will rarely work with an employer for so long, which in the current pension system is a significant risk of a fragmented pension and what we call “pension breach”.
As a result, the idea of retirement draws away from “the family” to “the individual”, and the collective nature of the pension is under pressure.
Within the pension were long two certainties:
- You can retire with 65 years
- You get 70% of the last earned salary
A few days ago, the trade unions had a major public transport strike to put pressure on employers and the government.And no (work) week later there are sounds that the retirement age may need less hard if first was predicted. We still go towards the 70, but over more years spread.
The 70% last deserved wage has been out of the job for a long time, but for many people this has never been clear.In Many collective bargaining agreements, the pension is based on a medium wage scheme, which means that the average income for the retirement accrual period is taken as a basis. Because of this, it is less attractive for an employer to give someone a strong salary increase shortly before retirement in order to Spey the pension.
What many people in the Netherlands also do not realise is that the pension consists of three parts.
The first part is the AOW, the general old-fashioned law.Here the taxpayer pays the benefit. The AOW is for most of the people most of the “retirement benefit”. On top of the AOW pension comes-when people have built up pensions at least. For this, you must have worked for an organisation that has/has had a pension in the working conditions and has also paid for it. As a ZZP-there is this for example not the case. This brings me to the third part, the self-saved part. This can be advantageous for the tax, this saved amount is only taxed upon allowance, and the tax rate for a pensioner is often lower as a working.
On top of that comes another problem, the problem of coverage.A pension fund must have sufficient funds to be able to pay future commitments. Because it is about money in the future, a formula for this is used, and it uses an interest rate. This is very low at the moment, which means that a number of (large and small) pension funds (at least on paper) have too little money.
Expectation vs Reality
You can now see a lot of tension emerge.The collectivity is under pressure and the collateral is less, the age goes up, the distribution of last-earned wages to the wage and also the height is uncertain by the degree of coverage.
People had high expectations, and these are not true.
The problem with the pension
One of the biggest problems with the pension is that for decades it has been a hot potato that is being pushed forward.I started working at a pension exporter in 2001 and had already been able to write this answer. The interest was then still higher, but the age problem and resource wage played then also already. I have an economic background and before I went to work in this field I was familiar with the problems.
There is a huge gap between 2001 and 2019, almost 20 years, which has been communicated to the question of how to deal with this problem.And the problems were already known, although low interest rates do not work in the coverage rate. We have one of the best pension systems in the world, but that cannot be poured into concrete.
Three parties have a role in this:
- The government
The government establishes the AOW age and the AOW allowance.
As described above: The AOW is the largest part of the retirement allowance for many people. The Government has the role to keep this affordable, and with the increased life expectancy the AOW is more expensive
Employers contribute to a significant proportion of the costs of retirement.
This is part of the collective bargaining agreement, and therefore a fixed cost item. If people live longer, more money in the retirement pot is needed for the same benefit, and this increases the costs for employers
The workers are often represented by the trade unions in the conclusion of collective bargaining agreements.
The trade unions therefore represent the importance of the (future) pensioners
Here we immediately see a division: The Government and employers benefit from a higher retirement age, because this keeps costs manageable.The employees (represented by the trade unions) have no benefit here, who want to retire with 65 years, and if it can sooner.
The government is in a spa, because the employees are also the voters, the political party that draws the retirement age to 70 commits political suicide.
What do I find myself
What I personally have the most trouble with in the whole pension issue is the lack of flexibility in the trade unions.
I have been reconciled for long and wide that I have to work until somewhere 70, and possibly longer.If I get that already, because that is not yet certain. Do me a pension where I can change employer without pension breach, which is worth me more if a few months less work. If I retire with 70 I have paid 45 years premium, and if there is a pension breach because I am at about half bill of exchange of employer that is super annoying (and so I just ask for a firm more salary with a future employer).
Because I find a good idea, I want me to be able to participate in this pension when I get there.So just 45 years premium, regardless of employer. If I cannot or do not want to pay, this means a lower allowance, which is also clear. But I do not want a lower benefit because I exchange the employer and come to another fund with a different level of coverage.
Furthermore-and this movement is fortunately already deployed-the pension can also be better aligned with life-events.The use of part of the pension money to finance a private home for example. If I can repay my mortgage more quickly, and with it you can print monthly charges, I also need less retirement benefits.
How to proceed with the pension?
Furthermore, but that is a slightly different issue, I think we should also be discussing the discussion around the pension.The world we live in is very different from the world in which the pension is conceived. There is much more prosperity now. In the past, the pension was an apple for the thirst, currently it is the deferred dream.
The question below is: why postpone the experience that you are now postponing until after your retirement?Then I come again on my 70 years: I have no idea how fit I am, and my wife is expected to be much less fit if she gets the 73 already (she is slightly older when I am). So I can make that world trip better now that we are still fit, if I have to push my wife with my fragile bones in her wheelchair. I can make that world trip better now, now that we are both not yet 50. But that is also tricky, because that means months with unpaid leave.
I suspect that this will be the issue of the generation after me, say, my children or their children.They have never known the certainty of retirement, except their parents or grandparents. My generation is already expecting a much greater flexibility as the generation of my parents (depending on the discipline), and this will be much more the case for the generations after me. Then that extra flexibility should also be able to translate into the more flexible work-handling. Less job and pension security, but rather the benefits of being able to make choices that people now postpone until they retire. One, two or three years ‘ maternity leave ‘ to be able to feed your child? Should be able to. Long care leave to be able to care for a sick family member or known: why not? Make that world trip when you’re 40? Even if it costs 2 years of work?
What does collectivity/solidarity mean?
We are now with a generation of elderly people who have had the same employer and a reasonably secure pension provision for 40 years.They rightly see the benefits of it, but they do not have the pension breach that many of my peers already have. They do not have to set themselves up to work until their 70th, or even longer. This is a generation with a lot of influence, both politically and in the trade union movement.
I hope that in the whole pension debate the younger, the generation after me, is not overlooked because it is not or hardly represented in both politics and trade unions. I myself sit on the intersection of the two generations and from solidarity/collectivity I choose the position of the younger.In the early years 2000 I went up the streets for the elderly, during the big demonstrations in Rotterdam (Coolsingel) and Amsterdam.
I see added value in the collectivity, but for me this is certainly not “counting most votes”.
This is in short how I look at the pension and the pension issue.