Limited indexation of Dutch pensions hampered pensioner purchasing power

The limited indexation of occupational pensions between 2011-2022 “negatively affected” the purchasing power of pensioners, Statistics Netherlands (CBS) data has revealed.

A report by CBS on purchasing power over the period 1977-2022 found that the higher amount of supplementary pension income a person receives, on top of the state pension (AOW benefit), the more their purchasing power has fallen since 2011.

For those with between €1,000-€2,000 of supplementary income per month, the drop in purchasing power was 5.2 per cent; for those with between €2,000-€3,000 euros of supplementary income, the drop was 7.5 per cent. For pensioners with more than €3,000 extra, purchasing power in 2022 was 10.9 per cent below the 2011 level.

However, pensioners with limited income have seen their purchasing power increase over the period. For those with monthly payments of up to €200 on top of their AOW, purchasing power increased 14.6 per cent and for those with monthly payments of €200-€500 gained an extra 8.5 per cent. Unlike the other groups with AOW, the purchasing power of pensioners with a small income increased sharply in 2022. This increase is mainly due to the energy measures in 2022, which provided a substantial boost for persons in the lower-income groups.

“The non-indexation or limited indexation of supplementary pensions up to and including 2022 therefore mainly negatively affected pensioners with higher supplementary incomes. In early 2023, several pension funds mostly applied substantial indexation to pension benefits. These increases may only become visible in the 2023 purchasing power figures,” the CBS said.

The Dutch Federation of Pension Funds chairman, Ger Jaarsma, believes the report proves the need for the country's pension transition, which is currently in progress.

"Researchers looked at purchasing power until the end of 2022. That is just before the time when many pension funds were finally allowed to give hefty increases, of up to 11 or even 14 per cent. That was not possible any earlier, either, because they were still operating under the rules of the old pension law," he said.

"That is why it is very good that we have a new pension law since last July. Actually, this survey is good proof of the necessity of the new pension law. Soon pensions will go up faster and earlier, if the economy is doing well."

He believes that is clear that the old pension law was "outdated" but warned that talk in politics about "retrospective adjustments or even abolishing this law" could mean things backfire.

"Nobody wants pensioners to remain financially stagnant for years again, while at the same time having large buffers. It is therefore important that pension funds are given peace of mind and space to do this mega job. We have made that clear many times to the informers and politicians," he concluded.



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