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The Actuary The magazine of the Institute & Faculty of Actuaries

Raising the real retirement age

Joris Beernaert and Corine Hoekstra discuss how the Low Countries are rising to the challenge

08 MAY 2014 | Joris Beernaert and Corine Hoekstra

Retired group of friends, Shutterstock
Photo: Shutterstock

In the last decade, economic and financial circumstances have put pressure on pension regimes across Europe. Add to this the effects of ageing populations and longer life expectancies, and it is not surprising that many European countries are redesigning their pension regimes. The ‘accepted’ retirement age of 65 is no longer set in stone, with many governments across Europe planning to raise, or having already raised their retirement ages. In Iceland and Norway, workers retire at 67; Denmark, the Netherlands and Germany plan to reach that level in the future, with the United Kingdom pushing things even further to 68.

This article focuses on two neighbouring countries that have invested in raising the (effective) retirement age: Belgium and the Netherlands. The motivation behind these reforms was the same in both cases – however, the measures adopted by the respective governments differ, and give rise to varying associated HR-related issues.

A.Effective retirement age until pension reforms

The Belgian state pension is a pay-as-you-go regime, with a retirement age of 65. Before the 2012 pension reforms, early retirement was possible at 60, provided the worker could prove at least 35 pensionable years, which can include periods of unemployment and certain career breaks. Notwithstanding the early retirement age, the effective retirement age in Belgian is 59.6 years for men, and 58.7 years for women. With these numbers, Belgium has the second lowest effective retirement age of all the OECD countries. This is partly explained by the so-called “bridge pension”, a pre-retirement regime during which unemployment allowances are complemented by allowances paid by the former employer.  The normal retirement age in the Netherlands has been 65 since the introduction of the state pension (AOW) in 1957. Due to early retirement regimes, the effective retirement age was, however, lower (approximately 62) in the early 2000s. 

B.Measures to increase the real retirement age 

Statutory retirement age 

The Netherlands started reforming its pension regime in 2005, taking tax measures to discourage early retirement. Thanks to these measures, the effective retirement age is currently 63.5 years. As of 2013, the Dutch AOW retirement age is set to increase gradually, to 67 in 2023. As from 2024, the AOW retirement date will be increased according to increases in the average life expectancy. 

Unlike the Netherlands, the Belgian government did not increase the state retirement age of 65. However, the early retirement age, and seniority requirements for early retirement, have gradually increased since 2013, and will do so until 2016. In 2016, a worker will be entitled to retire at age 62, if they have at least 40 pensionable years. Workers with a long career will be able to retire at 61, if they can prove a 41 year career, or at 60, if they can prove a career of 42 years. If a worker remains in service for at least one more year than the earliest possible retirement date, he is entitled to a so-called “pension bonus” (i.e. a premium for each day of employment).  The new legislation also provides transitional measures for workers who were on the eve of retirement before the reforms were approved. The eligibility conditions for the Belgian “bridge pension" scheme have also been restricted in order to increase the real retirement age.

Occupational retirement age 

Most Belgian occupational pension regimes provide for a normal retirement age of 65. However, as long as an employee remains in service of the employer (as the case may be after age 65), they must continue to accrue pension entitlements under the pension regime. Most plans also provide for an early retirement age, which cannot be lower than 60. The Belgian tax regime of the occupational pension schemes was however reformed in 2013, in order to encourage older workers to remain at work. From July 2013, if workers take their occupational pension benefit as a lump sum (most benefits are paid out as a once-off lump sum in Belgium) at the age of 60, the part accrued by employer's contributions is now taxed at a flat rate of 20%, where it was taxed at 16.5% before.  If they wait a few more years, the flat rate decreases to 18% (at age 61), 16.5% (at age 62 to 64) and 10% (at age 65 provided they remain professionally active until that age). Since the Belgian legislator did not align the occupational retirement age with the statutory retirement age it is therefore possible that a (deferred) scheme member receives his occupational pension before being entitled to state pension allowances. Raising the early retirement age and limiting the possibilities of “bridge pension” should certainly increase the effective retirement age. Since most of the reforms provide for transition measures the reforms can only be evaluated on their merits after a couple of years. It is also expected that the pension reforms will increase the number of workers who benefit from disability allowances. 

The Dutch second pillar (fiscal) retirement age increased from 65 to 67 years in 2014. This increase is one of several tax measures to have been implemented in 2014, all effectively resulting in a limitation of the tax facilities for pension accrual. Under the new tax rules, employees will need two extra pensionable years in order to reach the same pension benefits, compared to the situation prior to 2014. Continuing a pension regime with a retirement age of 65 is possible, if the total accrued pension does not exceed the new tax limits, based on a retirement age of 67. Maintaining a retirement age of 65 may therefore result in a reduction of the annual pension accrual. In practice, most employers have implemented the new legislation by increasing the retirement age in the pension regime to 67. In both cases, a gap exists between the first and second pillar retirement ages, as the AOW starts at age 65 and 2 months as of 2014. The main goal of the retirement age increase is, of course, to encourage employees to work longer. However, the consequences of this gap between first and second pillar retirement ages have led to some implementation issues, which could in fact discourage working longer. HR departments must be aware of these implications.  

C.Implementation issues  

Under Belgian employment law, it is not legal to automatically terminate an employment contract when a worker reaches statutory retirement age. It is, however, possible to terminate the employment contract of a worker who reaches the statutory retirement age of 65 with a reduced notice period. In this event, a worker is entitled to both a state pension and an occupational pension. 

Many older Dutch employment contracts automatically end at age 65, or on the pension date as described in the pension plan rules; the so-called ‘retirement clause’. Although a distinction is made here based on age, this was objectively justified, as the state pension and the occupational annuities started as of age 65. However, since 2014 the state pension starts at age 65 and 2 months. An automatic termination of the employment contract on an earlier date is no longer justified and can be successfully challenged by an employee, based on unequal treatment, if he wants to continue working. Employment contracts need to be in line with the new legislation and refer to the applicable AOW retirement date (in the respective year), in order to create an effective retirement clause.  But the implementation of a correct retirement clause does not resolve all issues. If the employment contract ends on the AOW retirement date, the employee will face a substantial decrease in his income, if the occupational pension provided in the plan rules start at age 67. The employee may want to bring forward the occupational pension, in order to reduce the income gap on his retirement date. Bringing forward the accrued pension, has to be requested several months before the envisaged early retirement date, so it is advisable to inform the older employees of this option in due time.   Instead of bringing forward the retirement date in the occupational pension regime, an employee may also choose to continue working after the AOW retirement date. If the contract automatically ends on AOW retirement date, a new (temporary) employment contract must then be agreed upon. Under Dutch law, a contract that directly follows an assignment for an indefinite period is considered to be a continuation of the indefinite assignment. This means that – even though the contract is temporary – the employee can successfully challenge the termination of the contract. One can imagine that employers are reluctant to offer a temporary contract to older workers if they are at risk of not being able to end the contract without going to Court. New legislation is currently being examined by the Dutch Senate providing additional rules to prevent this undesired consequence of current Dutch employment law. This means that if parties agree on a temporary contract, directly following a contract for an indefinite term on or after the AOW retirement date, the contract automatically ends on the agreed date, without notice. Also, the draft legislation enables employers to end the employment contract in the event no retirement clause exists and the employee reaches the applicable (AOW) retirement date, without having to seek the permission of the Employee Insurance Agency (UWV) or the Court.

The different statutory retirement ages may also give rise to issues within the context of international employment. Since the European rules (EU Regulations Nos. 883/04 and 1408/71) only coordinate, rather than harmonise, the different social security regimes within the EEA and do not apply to occupational regimes, it is perfectly possible that workers who have had an international career are entitled to different pensions at different ages. Moreover, asking for the payment of one pension could also impact the possibility of early retirement in another Member State, and the tax treatment of these payments. 


Average life expectancies are increasing throughout Europe, placing a heavy burden on European pension regimes. Governments are rapidly updating legislation in order to encourage employees to work longer – however, in practice, there are simply not enough suitable jobs available. Undertaking an evaluation in a few years’ time will show us whether the measures taken have been effective, and have led to a further increase in the effective retirement age.  In the meantime, the transition measures bring additional complexity to labour and pension laws.

Joris Beernaert is a pensions lawyer with Claeys & Engels in Antwerp.

Corine Hoekstra LL.M. is a pensions lawyer with Bergamin Pensions Law in Rotterdam  

Both firms are members of Ius Laboris, a global alliance of leading law firms providing specialist advice in relation to employment, employee benefits, immigration and pensions law.