More than half of the Netherlands’ state pension (AOW) was, for the first time, financed through general tax revenues rather than social insurance premiums in 2024, according to Statistics Netherlands (CBS).

The AOW is the Dutch state pension paid from age 67, with the amount determined by living situation and how long a person has lived in the Netherlands.

In the Netherlands, those insured under the AOW system and earning an income pay premiums that contribute to the funding of state pension benefits.

Since 2000, the AOW premium income has increased from €20.5bn to €23.4bn in 2024 (14 per cent). However, over the same period, AOW spending increased from €19.1bn to €51.9bn, equivalent to a 172 per cent increase.

Since 2001, AOW premiums have not been sufficient to cover the full benefits.

Therefore, the difference between AOW benefits and AOW premiums is supplemented by the state. In 2001, this amounted to €700m, about 4 per cent of the total coverage of AOW benefits.

However, this contribution has gradually grown over the following years, and in 2024, more than half of the AOW was funded from general resources (€28.5bn, almost 55 per cent) for the first time.

“The fiscalisation of the AOW is caused by receipts rising more slowly than expenditure. The faster rising AOW expenditure is mainly due to the ageing population, which means there are more and more elderly people,” CBS explained.

“In addition, the benefits themselves have increased because they are linked to the statutory minimum wage. Premium income increases much less than expenditure because the government has not linked premiums to expenditure. Thus, the government does not adjust the base of premiums and the rate in line with expenditure growth.”

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