Ageing, funded pensions and the Dutch economy

This chapter presents a discussion that seeks to identify through which different channels aging and pensions affect the Dutch economy, how these effects propagate, what the feedback effects are, and how the income distribution across and within generations is affected. It also seeks to quantify these effects through simulations that will allow one to assess the relative importance of different channels. Population in the Netherlands is expected to age in the coming decades as a result of low birth rate, lower mortality rate, and the baby boom generation. Pension system in the country consists of government-run pay-as-you-go (PAYG) system, funded compulsory occupational pension schemes, and voluntary private savings. The chapter explains the IMAGE model, benchmark path, policy instruments for pension funds, fixed premium, valuable indexation, career average pensions, government policy options, aging and labor participation, and lower rates of return.