The cost-sharing standard (kostendelersnorm) - a regulation affecting recipients of supplementary income for older people, often with a migrant background - may lead to financial and health problems for thousands of people, economists Ernst-Jan de Bruijn and Heike Vethaak have found.
Households receiving the Supplementary Income Provision for the Elderly (Aanvullende Inkomensverzekering Ouderen; AIO) lost around €1,500 per person per year over a period of at least seven years. This was due to the introduction of the cost-sharing standard, which forms part of the AIO.
These findings are based on calculations by economists Ernst-Jan de Bruijn and Heike Vetkaak, together with Marike Knoef from Tilburg University. In total, around 6,500 people were affected during the period studied (2011 - 2021). Pensioners with a migrant background are particularly likely to qualify for the AIO.
The researchers also observed an increase in the use of medication for high cholesterol and high blood pressure among this group following the introduction of the cost-sharing standard. A plausible explanation, the researchers suggest, is reduced financial scope to maintain a healthy lifestyle, which in the long run results in poorer health.
Significant drop
Here's how it works: if you come to work and live in the Netherlands at a later stage in life, you are unlikely to have accrued a full state pension (AOW). As a result, your income may drop significantly when you retire.
You may then be eligible for AIO, a scheme introduced in the Netherlands in 2015 as part of the Participation Act (Participatiewet). However, the AIO stipulates that if your household includes other adults (aged 27 or older) in addition to your partner, the cost-sharing standard applies. This reduces the amount you receive each month, based on the assumption that household members share expenses such as rent and groceries.
Huge impact
The cost-sharing standard applies to a few thousand Dutch citizens with a migrant background. It is common for them to continue living with their children after retirement because this is culturally expected.
'Many people in this group are already living on the minimum income threshold', says Vethaak. 'As you can imagine, a permanent reduction of €1,500 a year has a huge impact.'
Using data from Statistics Netherlands, the researchers also found that more people in this group started taking cholesterol and blood pressure medication after the introduction of the standard compared with a control group. 'The cost-sharing standard therefore has a negative impact on health in the longer term', says Vethaak.
'This seems to affect a forgotten group, a group without a voice'
Scrap or ease the regulation
Based on their findings, De Bruijn and Vethaak's main message to policymakers is clear: don't focus solely on money when developing such policies, but also consider the health implications. 'And consider easing the cost-sharing standard within the AIO to reduce health inequalities', says Vethaak. 'As this concerns a relatively small group, the cost of abolishing the measure would be limited.'
It is worth noting that the cost-sharing standard was introduced for the AIO in 2015 as part of the Participation Act, but not for the AOW. Vethaak has a suspicion about why.
'The cost-sharing standard was not introduced for the AOW due to strong public opposition. The standard was also labelled a "carer's penalty" because it penalised people's income when older people moved in with their children to receive care. But the group affected by the AIO didn't speak the language well or have networks with access to politicians, and they represent a small voter base. So it seems to be a forgotten group, a group without a voice.'
Over 75,000 people in the Netherlands receive AIO benefits, which supplement an incomplete pension to the minimum income level. The number of eligible recipients is growing as more people reaching retirement age have not accrued a full state pension and have limited assets.
People do not accrue a full state pension if they have spent some or all of the 50 years before reaching the state pension age living outside of the Netherlands. For each year spent abroad, their AOW pension is reduced by 2 per cent. As a result, AIO recipients are often people with a migrant background and are more likely to live on or below the poverty line.
Source: ESB.nu
