Working during your retirement: here's how to do it smartly

For the AOW (state pension) system, the intention to further increase the state pension age means you may become entitled to your AOW benefit later than previously agreed in the Pension Agreement. In the coalition agreement, the state pension age is linked directly to the increase in life expectancy, unlike the 8 months per year of life that was part of the pension agreement.

Image: Cabinet's AOW plans (image: NOS.nl)

That could mean:

• Working longer, for the youngest generation even until after the age of 71.
• Or bridge a period with your own resources or pension.

The plans tighten the WIA in several areas. The biggest changes are in (1) the benefit ceiling and (2) the abolition of the IVA (for new entrants).

1. Lower benefit ceiling (maximum daily wage)
   The government wants to reduce the maximum daily wage – the upper limit on which unemployment and disability benefits are calculated – by 20%. In amounts currently being circulated, this amounts to a decrease of approximately € 6.617 to € 5.293,60 gross per month (based on the current monthly maximum).
   This particularly affects people with middle to higher incomes: their benefits are cut off more quickly, which increases the income drop in the event of unemployment or disability.
2. Abolition of IVA
   Currently, fully and permanently disabled individuals in the IVA receive benefits equal to 75% of their (capped) daily wage. The plans eliminate the IVA distinction for new entrants, bringing this group to the current level for the WGA: 70% instead of 75%. This group will also be subject to reintegration obligations and face the risk of reassessments.
   Important: according to the budgetary annex to the coalition agreement, current IVA beneficiaries will retain their IVA rights at the time of implementation.
3. WGA: shorter 'wage-related' phase
   For people in the WGA (Partially Disabled Persons Act), the wage-related phase will be shorter because it is linked to the duration of unemployment benefits (WW), which the government is shortening to one year. This means you'll enter a subsequent phase more quickly, with the risk of receiving a low follow-up benefit that is often far below the social minimum. In some cases, you may be entitled to a supplement from the Employee Insurance Agency (UWV) up to the social minimum.

For people with additional insurance excess coverage, it depends on the policy conditions whether (and for how long) this difference is compensated.

The government wants to reduce the maximum duration of unemployment benefits to one year. This means that if you're dismissed, you'll be entitled to wage-related benefits for a shorter period.

In addition, it is proposed to reduce the maximum daily wage by 20%. This maximum determines the upper limit of unemployment benefits.

The government also proposes to significantly limit the accrual rate. Currently, for each year worked, you accrue one month of unemployment benefits during the first 10 years. If the government has its way, this will be halved to half a month per year worked. This means that after ten years of employment, you will only be able to rely on unemployment benefits for five months instead of 10, otherwise you will have to rely on social assistance.

In addition, the eligibility requirement is being adjusted, requiring you to have worked longer to even qualify for the short-term unemployment benefit of three months. Both of these changes will have significant consequences, especially for young people.

The benefit in the first two months of unemployment should be increased from 75% to 80%.

Sample calculation (indicative):

• Current maximum daily wage ≈ € 6.600 gross per month
• Unemployment benefit first two months: 80% in the first two months → approximately € 5280 gross per month
• Unemployment benefits after 2 months (70%) → € 4620 gross per month

If the maximum daily wage is reduced by 20%:

• New maximum ≈ € 5.280 gross per month
• Unemployment benefit first two months (80%) → approx. € 3.960 gross per month
• Unemployment benefits after two months (70%): € 3696 gross per month

That's a difference of almost €1.000 gross per month at maximum benefit.

For middle and higher incomes, this could mean a significant drop in income.