4 months Ago
Larger Difference Between Premiums and Pension Payments
AOW benefits are extended to anyone who has lived in the Netherlands and reaches retirement, now set at age 67. The amount is based on a person's length of time in the country, as well as their living situation. Those insured under AOW pay a premium from their income, which in the past helped to finance the benefits.
But these premiums are growing more slowly than the cost of payouts is rising. Since 2000, income from AOW premiums has increased by just 14 percent — €20.5 billion in 2000 versus an estimated €23.4 billion in 2024. By the same time, AOW expenditures overall had risen by 172% -- from 19.1 billion to 51.9 billion euros.
The contributions to the AOW no longer fully cover the benefits since 2001. That year, the government provided €0.7 billion, or some 4 percent of the total AOW payouts. Last year, revenue had to finance 55% of the total, or a sum of € 28.5 billion.
Ageing Population Driving Up Costs
The considerable rise in AOW expenditure is primarily the result of the increasing number of elderly people. As America's population grows older, more people become eligible for benefits, and fewer are paying into the system. Another reason is that AOW contributions are indexed to the minimum wage, not to actual pension costs, so their growth is currently constrained.
This trend in demographics still puts pressure on public finance and shows the importance of taxation in the self-supporting part of the Dutch pension system.
