Best Posts in Thread: Rich or poor

In the Netherlands the state pension does not depend on career, only on having been a resident between ages 15 and 65, For each missed year you get 2% less than the standard pension. Each citizen has their own pension (around 800 €), so a couple gets double that once they both reach pension age (used to be 65, 66 years and something now, but will rise further in years to come). Pensioners who live on their own get an extra 400€ a month on top of their state pension, but loose that when moving in with a partner (so yes, marriage/cohabitation is expensive for Dutch pensionado's lol). There used to be a system where pensioners would get extra if they are sole provider in their family and have a younger partner, but that has been abandoned.
On top of that, most people (all those receiving a salary) are insured compulsory with a pensionfund and receive a (private) pension on top of their state pension from legal pension age. These pensions do depend on career, many used to be based on 75% (including the state pension) of end-pay, built up in 40 years of employment, but nowadays that has mostly given way to a cheaper "average pay" base.
Self employed people need to make their own arrangements if they deem the state pension insufficient.

The Dutch pension system has previously been described as one of the best internationally. Currently pensionfunds are struggling however because the central bank requires them to calculate (current reserves against future obligations) returns on investment based on the very low current interest rate. A major overhaul of the system is therefore in the works, despite these pensionfunds sitting on huge financial reserves.

 

Retired Americans receiving the “max” social security can reach the bottom of the upper middle class level. Additional income is needed to join the rich, unless of course you are a young fit healthy person still working. Nice to know we have a few of them among us.

 

As for us foreigners in this country, I would assume and hope that a large majority will classify in at least the "upper middle income" bracket.
Whether that means they're actually above where they'd be in their home country depends on priorities / spending habits.
Obviously (in non covid times) it is much more affordable to dine out here than in first world countries, so if you value that highly you might feel your buying power here is a fair bit higher; same goes for buying/renting a house, for most of us it's much cheaper here; same for owning a car, insurance/road tax, fuel, maintenance is all much cheaper.
For those who insist on buying loads of imported stuff in the supermarket, they might feel this place is twice as expensive as in their country of origin (liquor and cigarettes excepted, because of way way lower duties).

I would guess for most of us the balance financially is still a positive one, especially for those who benefit from (income) tax treaties.

 

I read the article a few days ago, the income in the study apparently refers to family income, not to individuals, and it's unclear to me whether the stated income brackets are before or after tax. Moreover there seems to be confusion about whether family in this analysis coincides with household.
Senators were also confused by the report, and have asked PIDS to clarify their numbers/brackets.

 

Let me say this for starters, politicians are by nature not well endowed with ability to make decisions on pension systems (and some are said to be not well endowed otherwise also ). Why? Because pensions need a very long term view, and the political horizon never reaches beyond the next elections (that's also a major reason why many politicians are weary of "reverse climate change policies", but that's a story for another day).
In "no state pension" land, there's basically two ways to fund a new system
1. you make a law that says everyone over the age of (Netherlands and most other countries 65, France 60, for some even 55, Italy I think 60 initially also) as from next month will receive a pension (most popular with politicians, because it'll make people/voters happy next month). Problem with that is the only way to finance such a system is by making those who work now pay (through taxes and/or through premiums) for pensions given to other people (65+) now.
2. you make a law that says everyone will get a pension once they turn 65, but only to the extent they've been paying premiums under the law. Problem with that is none of the current 65+ population will be happy, and neither will the ones who will turn 65 before having paid sufficient premiums to receive the full state pension.
So almost all countries ended up with a state pension with system 1, even though experts warned of future problems.

In fairness, in a country with widespread poverty among the elderly, but with a fast growing economy and little or no unemployment you'd be hard pressed to find any reasonable person to advocate system 2 from the start because that would perpetuate that poverty to a substantial extent for another 30-40 years or so.
And yes, while the demographics of a country look somewhat similar to this (pretty much everywhere in the early fifties)

it is easy to see that financing the few current old age pensions from current taxes/premiums doesn't create a big burden.

However, once the population pyramid starts looking like this


it gets hard to change to system 2. because the burden on the economically active to provide for the state pensions of the elderly is already a large multiple of what it was at the start, so making them pay double that to build up some reserves in a "state pension fund" is politically not viable.
For the Netherlands, the start was 1956, so my grandfather, born 1900, who only paid the state pension premium from age 56 until 65, then received a full state pension (on top of what he'd been saving/investing because he never expected to get a state pension until he was 56). Needless to say my grandfather was among the first working class citizens to buy a modest car in the mid 1960's. He wasn't an average example though, most elderly citizens didn't have much savings if any, ww2 hardships took care of that for many people.

Currently in Europe and Japan/Korea the population graph starts looking like this already.

Too late to fix the pensions, you'd have a revolution on your hands when trying to fix the pension system from system 1 to system 2.

The problem with all this is that demographics is the only social science with impressively accurate long term forecasts, in other words, politicians knew this was coming for a long long time, and did nothing.

 

Interesting, wonder if these brackets corespond to the old socio economic groups here... A,B,C,D,...etc?

 

it could be a plea for help