Ageing: a problem in the financial sector as well?

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The Netherlands is getting older and older. The total new inflow of young people into the labor market will be lower than the total outflow of older people leaving the labor market. It is even expected that in 10 years’ time there will be at least  400,000 more people over 80 years old than now. This phenomenon is called ‘ageing’.

The Dutch pension system: what’s it all about?

Before discussing the development of the ageing population in the Netherlands, we will first consider the operation of the pension system in the Netherlands. The Dutch pension system consists of three pillars. The General Old-Age Pensions Act (the 1st pillar), pension accrual at the employer (the 2nd pillar) and individual supplementary pension provisions (the 3rd pillar). The 1st pillar, also known as AOW, serves as a basic income in order to make a living during retirement. Everyone who lives or works in the Netherlands automatically builds up AOW. The 2nd pillar is a supplementary pension accrual via the employer that is paid on top of the AOW benefit. Individual insurances, such as annuities and life insurances, form the 3rd pillar. This makes it fiscally attractive to save for the pension. In the remainder of this article, the developments regarding the increasing number of pensioners in the Netherlands and the consequences that this entails will be discussed in more detail.

Increasing healthcare costs: a causal relationship

The first problem we run into in the long run is the cost of care for the elderly in the Netherlands. “We already have a large shortage of people for elderly care. Meanwhile, the demand for personnel on the labor market is going to double”, Jeroen van den Oever of home care organization Fundis told RTL News. To combat this problem, the government should spend more money on care in the future. At the moment there is an increasing demand for personnel, especially in the care, education, IT and technology sectors [1]. A causal relationship can be drawn from this. Because the amount of elderly people increases, there is more work in the care sector. This increases the work pressure. However, it is becoming more difficult to find suitable personnel, partly because the working population is becoming smaller and smaller.

“Older people have grown up with the idea of a job for life, while young people are strongly aware that they will have to reinvent themselves a few more times.”

Ageing at banks
Not only the healthcare sector is subject to an ageing population. More than fourteen years ago, De Trouw already indicated that the top of the financial sector is grey and only getting older [2]. Research by Rabobank can indeed confirm that the average age in the financial sector has grown the most in recent years. From 2001 to 2014, the age of employees in this sector increased by more than 5.8 years. One explanation given by Leontine Treur, senior economist at RaboResearch Nederland, is that fewer and fewer people are working in the financial sector and fewer people are joining [3]. Especially the three major banks; Rabobank, ABN Amro and ING are struggling with the ageing of their workforce. On average, about half of the Dutch employee population is over fifty years old at these banks. In addition, a difference in attitude is noticeable between generations. Older people have grown up with the idea of a job for life, while young people are strongly aware that they will have to reinvent themselves a few more times. Older employees find it harder to adapt to the increasing automation of recent years. Concrete examples where older workers in general have more difficulty than young people include the rise of mobile banking and the innovations in payment transactions [4].

Despite the fact that older people find it more difficult to meet the higher demands of increasing automation, they are still indispensable in the work field. A risk is that a lot of knowledge and experience of AOW entitled employees will be lost if this group decides to retire when they reach retirement age. To prevent this, the Rutte II cabinet has made it possible to continue working after the state pension age. In January 2016, the law ‘Working at a retirement age’ was introduced. This law ensures, among other things, that working AOW’ers have the right to keep their minimum wage, employers no longer have to pay premiums for social security, and that employers only have to continue to pay thirteen weeks wages should the retired employee fall ill. Research has shown that this law has not yet led to a significant increase in pensionable employees. In addition, there is the question whether this law is known to employers in the Netherlands. However, it is expected that employers will make more use of this law in the future and some employers have indicated that they already work with retired employees. For example, a retired employee can work varying hours per week. Should this AOW-certified employee no longer be able to work with the systems, he or she will be able to carry out other work that is still of added value to the company. The advantage of this is that young employees can more quickly meet the expectations of the increasing automation of work, while retired employees can transfer knowledge and experience if necessary [5].

It can be concluded that the Netherlands is ageing and that the labor force will age even more in the coming years. In order to keep care for the elderly affordable, among other things, the government introduced a law in 2016 that will gradually be used by more employers. The question remains whether employers in the financial sectors will also make more use of the law ‘Working at a retirement age’. Despite the fact that this is one of the sectors where the ageing of the population has risen the most in recent years, Dutch banks, among others, need fewer staff because the increasing automation is taking a lot of work out of their hands. Because older employees find it more difficult to adapt to the ever-changing workload due to automation, it is obvious that banks are more likely to opt for starters in order to rejuvenate the workforce, among other things. In addition, young people have grown up with ever-increasing automation and are familiar with emerging tools such as Power BI and Tableau [6]. But don’t we throw away a lot of useful knowledge and experience if we no longer utilize our retirees who want to work?