Call to cut old age pension in welfare reform

1st March 2005, Comments 0 comments

1 March 2005, AMSTERDAM — The Dutch welfare state must be reformed so that government income support is exclusively aimed at those who really need it, the Central Planning Bureau (CPB) has advised.

1 March 2005

AMSTERDAM — The Dutch welfare state must be reformed so that government income support is exclusively aimed at those who really need it, the Central Planning Bureau (CPB) has advised.

The government's economic advisory body said the AOW state pension should be abolished because the money allocated to the scheme is largely paid to people who are sufficiently wealthy enough not to need it.

A bureau official said the original plan for the AOW pension was to help people who do not have enough money to make ends meet. But the official said that even those with higher incomes currently profit from the generic state pension.

But Economic Affairs Minister Laurens Jan Brinkhorst said in his first reaction to the Monday-published CPB report that the Cabinet had not placed the future of the AOW pension up for discussion.
 
Government coalition parties the Christian Democrat CDA and Democrat D66 also reacted negatively to the proposal, newspaper NRC reported.

The CDA said everyone has a right to a pension from the age of 65, pointing out that high income earners pay more tax than low income earners to help fund the AOW pension, providing the necessary solidarity.

D66 MP Bert Bakker said that he could not imagine that any MP would want to abolish the AOW pension. He said doing so would create a large gap in every Dutch resident's old age financial security.

An MP with opposition party green-left GroenLinks, Kees Vendrik, said abolishing the AOW as the basic entitlement would play "havoc" with every Dutch pension.

But D66 and GroenLinks are keen to discuss a change to present regulations forcing high income earners to pay more tax to fund the AOW system.

In its report, the CPB said reducing income inequality — the primary focus of a welfare state — is at odds with efforts to increase workforce participation and improving the level of education. It called for a tougher approach to social security recipients.

Those who can live without government support should no longer come into consideration for such support. The government should thus scrap fiscal arrangements and subsidies of which both rich and poor profit.

It said if high income earners also have a right to government support, the motivation to work harder will be reduced. It also said general measures such as the AOW are very costly.

The CPB said cuts could also be introduced to the tax reduction offered on mortgage interest and the fiscally attractive income savings schemes. High income earners largely benefits from such schemes.

[Copyright Expatica News 2005]

Subject: Dutch news

 

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