reader questionsWith the elections approaching nails the House of Representatives for billions to the government’s Budget Day plans. A planned increase in excise duties on petrol will be canceled, the minimum wage must be increased slightly and train and bus tickets must not become more expensive. But what will they do for the elderly is a question that concerns readers. This was evident from the responses to our call ‘What do you want to know about the General Political Considerations’. This is what the experts say.
What are the plans for linking the minimum wage to the state pension?
That link will remain in place. It works as follows: the minimum wage is adjusted twice a year to the average collective labor agreement increase in the Netherlands. The AOW then increases – just like social assistance – by the same percentage. It is not yet known exactly how high that increase is. The benefit amounts will not be known until December.
When will something finally be done about the regular disadvantage of the elderly with only state pension and perhaps a small pension?
In recent years, AOW benefits have simply increased with wages. Successive governments have systematically increased the earned income tax credit to make work more rewarding. Pensioners are not entitled to this. Next year, the employment tax credit will also increase slightly further, by 115 euros per year, for people who earn between minimum wage and average. At the same time, elderly people in social housing, for example, benefit from the higher rental allowance, which increases by a maximum of 416 euros. The sore point for many retirees is that the pensions were not or barely indexed until last year. However, it is the pension funds that decide on indexation and not the cabinet.
When will retirees improve? They have been ignored for years
It has indeed not been a great deal for most retirees in recent years. The vast majority of pensions have not been increased for years, and in some cases the pensions have even been reduced. According to calculations by senior citizen associations, this has resulted in pensioners losing purchasing power by up to 20 percent.
But this year most pensions have increased. Due to the higher interest rates and more flexible rules, pension funds had room to increase pensions. If finances permit, the pension funds also want to increase pensions next year. By how much depends on the financial health of the fund.
What is being done for the pensioners? This group has given up the most and has often worked for 40 years or more.
The hope and expectation is that pensions will rise faster when the new pension system comes into effect. That will be no later than 2028. Now the strict financial rules mean that pension funds must have a lot of money in cash before they can increase pensions. Under the new system, they are allowed to distribute the money to pensioners earlier. If assets increase, retirees will receive more money more quickly. Conversely, pensions are also reduced sooner if assets decline. But the general expectation is that, on balance, increases will be made more often than decreases.
How will retirees cope with all the increases that are coming?
That is difficult to predict. The European Central Bank has announced that it will keep interest rates high for a longer period of time. This high interest rate is favorable for pension funds. The higher the interest rate, the faster they can increase pensions. But it’s not just about interest rates, pension funds invest hundreds of billions in shares, real estate and bonds. If those investments yield well and therefore generate additional assets, the pension fund can use part of that money to increase pensions. But if the value of the investments falls, there is little or no room to increase pensions. And predicting what the stock markets will do in the coming years is really more crystal ball gazing.
This article was created in response to reader responses. A new call for Readers’ Questions will appear next week. Then you can send your question via ad.nl/readersquestions.
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