The existing pension system is unsustainable and needs a radical overhaul, according to the Goudswaard Commission. The commission acknowledges that the Dutch system is unique and in many ways admirable, but it warns that employees cannot continue to expect 70 percent of their salary as a pension at the age of 65.

The commission headed by Professor Kees Goudswaard was asked by Social Affairs Minister Piet Hein Donner to advise on the continued viability of the pension system in the face of an ageing population and the financial crisis. The Dutch system consists of a state pension combined with a supplementary pension provided by pension funds which most people contribute to through their work.
 

Several factors have made the system increasingly expensive: because of the ageing of the population less people are paying premiums, pensioners are living longer and the pension funds' profits from investments are far less reliable than they were. This has driven up the amount of premium paid by both employees and employers.
 

The commission calculates that in order to maintain the expected pension level of 70 percent of salary, premiums would have to increase from the current 13 percent of pay to 17 percent by the year 2025. This increase, totalling more than 25 billion euros a year, would significantly damage the economy.
 

The commission offers a choice of alternatives: employers and employees should reduce their expectations and accept either a lower pension or a higher retirement age or a combination of both, otherwise they will have to accept greater risks in terms of investment and the resulting unpredictability in the size of ther supplementary pension.
 

The report adds that Dutch pensions are on the generous side at present, in international terms.

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