Aging population: Tax money funded over half of Dutch state pension benefits last year

Last year, for the first time, over half of the Dutch state pension benefits (AOW) were funded with tax revenues. Due to the aging population, premiums from workers are covering less and less of this expense, Statistics Netherlands (CBS) reported on Wednesday. In 2024, AOW accounted for almost 6 percent of government expenditure, compared to virtually 0 in 2000.

Everyone who has lived in the Netherlands and has reached the State pension age - 67 years from last year - will receive an AOW benefit. The amount depends on their living situation and how long they have lived in the Netherlands. People insured for AOW and with an income pay premiums that are used to cover the benefits.

Since 2000, income from AOW premiums has increased 14 percent from €20.5 billion to €23.4 billion in 2024. At the same time, AOW expenditure rose by 172 percent, from €19.1 billion to €51.9 billion.

AOW premiums stopped fully covering the benefits in 2001. The national government covers the rest from tax revenues. In 2001, this amounted to €0.7 billion, approximately 4 percent of the total AOW benefit. Last year, the government paid almost 55 percent of benefits, amounting to €28.5 billion.

Benefits are increasing much faster than premiums primarily due to the aging population, meaning that there are more and more AOW recipients every year. Premiums are also linked to minimum wage, and not to government expenditure on AOW, so they rise much more slowly.