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Retirement age to be raised to 67 in two stages

News item | 23-12-2009

The government has announced plans to raise the age of retirement under the General Old Age Pensions Act (AOW) to 67 years to 66 in 2020 and 67 in 2025. The new legislation will include measures to enable people to work longer.

This increase in the retirement age under the General Old Age Pensions Act is necessary to offset the effects of demographic ageing and rising life expectancy. The economic crisis has accelerated the depletion of the reserves intended to compensate for these developments.

The retirement age will be raised in two stages, and the transition period of ten years will give employers and older workers time to prepare.

The new legislation will include measures to enable people to work longer. Minister Piet Hein Donner and State Secretary Jetta Klijnsma (Ministry of Social Affairs and Employment) submitted their draft bill to the House of Representatives on 23 December.

Long-term employability

Both employers and employees will have a statutory obligation to ensure that long-term employability is possible. Measures may include monitoring employee health, maintaining appropriate working conditions and providing timely refresher courses and retraining.

Demanding work

Employers will be required to offer less strenuous work to employees who have held a demanding job for thirty years or help them find a job at another company. Alternatively, an employer can pay compensation equivalent to 140% of the employee's annual salary, thus enabling him or her to retire at 65.

Demanding occupations are those which lead to irreversible physical wear and tear after thirty years. Employers' and employees' organisations in the various sectors of employment will have an opportunity to nominate occupations to be classified as demanding. The government will make the final decision.

Earlier retirement

Employees and self-employed people who have worked at least 1,225 hours a year for 42 years will be allowed to retire at 65. (Initially this rule applied only to employees.)

Those who make use of this option will receive a reduced pension. This option is not available to those whose financial situation would be reduced to a level that would necessitate their receiving benefit under the Social Assistance Act.

A new income-related employed person's tax credit will be introduced to ensure that low-income earners with a long employment history can retire at 65.

Bridging benefit

The government will provide a bridging benefit for people who become unemployed or partially unfit for work at an advanced age and are at risk of falling under the Social Assistance Act. The amount of the bridging benefit will be comparable to that of the state pension.

Recipients will not have to draw on their personal assets. A partner's income and assets will have no bearing on eligibility.