AMSTERDAM - Unions and employers in the Dutch light engineering sector effectively have agreed to raise early retirement age by two years, to age 61.
The sector, which covers small companies ranging from bike repair shops to plumbers, employs some 300,000 people and is seen as a trend-setter in Dutch wage negotiations.
Early retirement schemes, which are operated independently of company pension arrangements, were first introduced in the Netherlands in the 1980s as a way of encouraging older, higher-paid employees to leave the workforce.
But retirement from upwards of the mid-50s on a benefit averaging 70% of current salary has made the plans increasingly unwieldy and expensive. As more workers approach early retirement age, contributions (paid by both workers and employers) have risen sharply. The government and employer organizations would like to see the plans phased out completely.
The light engineering sector now has gone this route, scrapping its traditional early retirement scheme as of 1998. It will be replaced with a "pre-pension scheme," allowing workers to retire at age 61 at a pension equal to 90% of their final pay. At age 65, the benefit (including the state old-age pension) will drop to 70% of final pay. Retirement at age 60 will be possible, but workers will have to save up vacation days or face a lower income. Employers and workers will split the cost equally.
Saskia van Hock, a union negotiator for the Industriebond, said the new system ultimately will create more jobs.
Ending the old early retirement scheme also is a major boost to government plans to reform the entire Dutch pension sector (Pensions & Investments, Oct. 14).
Discussions are under way to set up a special trust fund to supplement the Algemeen Ouderdoms Wet, the state pension fund, as the baby boomers approach retirement age.
An unexpected tax windfall of 4.6 billion guilders ($2.5 billion) revealed by the government Jan. 20 has added fuel to calls to set up the special trust fund. While the cabinet is divided over how to spend the extra cash, MPs from the tripartite coalition of social democrats, free-marketers and reform democrats are keen to see the money used to launch the fund.
Prime Minister Wim Kok gave his backing to creation of the fund earlier this year. Finance Minister Gerrit Zalm also supports formation of the fund, but Social Affairs Minister Ad Melkert wants to use the windfall to reduce employer taxes instead. Mr. Zalm is expected to reveal further details early this month.
Private-sector critics would rather use the windfall to reduce state debt - expected to fall 2.6 percentage points to 76.2% of gross domestic product this year - thus reducing government financing costs and freeing other funds to shore up the existing state pension fund.
But creation of the special trust fund may well succeed. By transferring the windfall to the fund, it will help the Netherlands move toward Maastricht Treaty debt ceiling of 60% of GDP - a politically more palatable approach than cutting government spending.