SP Member of Parliament Wants to… Decrease Retirement Ages?!

Sadet Karabulut, member of the Dutch parliament for the Socialist Party, published a report this week to fight youth unemployment. One of the proposed features of policy interventions is to reintroduce the “VUT” – a measure that stimulates early retirement.

Sadet Karabulut

SP member Sadet Karabulut

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Pitfalls of Funded Pensions

A trend can be observed that countries switch from pay-as-you-go (PAYG) to funded or semi-funded systems. “Brussels” supports this switch, because it supposedly is “actuarially fair”. The interest in pension systems has risen because of the aging problem. Many welfare states instituted fairly generous pension systems in post-WWII decades. They started paying out pensions to those who suffered the war and could no longer work. But since those governments had not collected contributions, these pensions had to be paid out of taxes. Implicitly, the workers who paid those taxes were promised that whenever they were to retire, that the workers of that time – future generations – would pay their pensions. This is basically what is called a PAYG pension system. Pension payments increased steadily over time, thus becoming more generous, which was not really a problem during the 20th century because of increasing populations and economic growth. Continue reading