SDG 10.2 Financial sustainability

The second part of SDG 10 focuses on financial sustainability . Both households and the government incur debt and accrue wealth and capital. Financial liabilities of government and households have an impact on well-being of future generations. Financial systems may prove vulnerable when confronted with an ageing population, economic crises, geopolitical tensions and globalisation, or with decreasing solidarity between generations or between population groups.

Summary of results
Dashboard and indicators
SDG 10.2 Financial sustainability
Further reading

Summary of results

Trends of six indicators point towards decreasing well-being, while three indicators have positive trends.
The previously downward (green) trend for people’s concerns about their financial future is now neutral.
On no indicators is the Netherlands in the top group of the EU27.
Average household debt is trending upward, and the Netherlands is trailing in the EU for this indicator.
Average mortgage debt is also trending upward.
Demographic developments are putting pressure on financial sustainability: green pressure is decreasing while grey pressure is increasing. The number of pensioners per hundred active pension fund contributors has risen further.
Public health spending as a percentage of GDP is higher than in most other EU countries; the Netherlands is in the lower half of the rankings. This is unfavourable from the perspective of financial sustainability

Dashboard and indicators

SDG 10 aims to reduce inequality within and between countries. So many aspects of this are relevant in the context of Dutch government policy, that we have divided SDG 10 into two dashboards. This second dashboard examines the financial sustainability of Dutch well-being and the financial situation of Dutch households.

Both households and the Dutch government incur debt and accrue wealth and capital. Financial liabilities of government and households have an impact on well-being of future generations. Financial systems may prove vulnerable when confronted with an ageing population, economic crises, geopolitical tensions and globalisation, but also with decreasing solidarity between generations or population groups. The picture in this dashboard is fairly sombre, with six red and three green trends. Nowhere in the dashboard is the Netherlands near the top of the EU rankings.

SDG 10 Reduced inequalities: financial sustainability
Resources and opportunities
34.1%
ratio of over-65s to 20-64-year-olds in 2022
12^th
out of 27
in EU
in 2021
Grey pressure
36.2%
ratio of under-20s to 20-64-year-olds in 2022
8^th
out of 27
in EU
in 2021
Green pressure
9.3%
of employee wages in 2021
Pension contributions
€ 151,500
per household (2020 prices) in 2021
Estimated mean pension assets ^A)
115.9%
of pension liabilities are covered on 31 December 2022
Coverage ratio pension funds
8.7%
of gross domestic product in 2021
21^st
out of 27
in EU
in 2020
Government expenditure on public health
16.6%
of gross domestic product in 2021
13^th
out of 27
in EU
in 2020
Government expenditure on social protection
Use
52%
of present income is average expected pension in 2022
13^th
out of 26
in EU
in 2021
Pension entitlements
61.6
per 100 active participants in pension funds in 2021
Pension beneficiaries
Outcomes
51.0%
of gross domestic product in 2022
10^th
out of 27
in EU
in 2021
Government debt
€ 105,602
per household (current prices) in 2021
22^nd
out of 24
in EU
in 2021
Average household debt
€ 195,700
per household with a mortgage debt (current prices) in 2021
Average household morgage debt
€ 65,792
per household (current prices) in 2021
8^th
out of 27
in EU
in 2021
Currency and deposits per household
0.70
ratio of total mortgage debt to value of property (heads of household younger than 35) in 2021
Loan-to-value
Subjective assessment
28.6%
of the population over 18 are very concerned in 2022
Concern about future finances

Resources and opportunities relate to whether the welfare state is sustainably funded and whether pension funds are building up their capital responsibly, without saddling future generations with unsurmountable problems. Demographic dependency ratios provide more insight into relations between workers and non-workers in the population. Grey pressure (ratio of people aged 65 years and older to those aged 20 to 64 years) is increasing, while green pressure (ratio of people younger 20 years to those aged 20 to 64 years) is decreasing in the Netherlands. Both these developments are unfavourable for long-term sustainability of well-being, and the trends for both are red.

CBS population forecasts predict that the Dutch population will grow to nearly 21 million by 2070 according to the most likely scenario, although obviously there are many uncertainties. The share of over-65s is expected to increase substantially: people born during the post-war baby boom and in the 1960s will belong to this group, and added to this people are living longer. Retirement pensions and other old-age provisions are crucial for the livelihood of this group.

Pension assets accrued through pension funds are not freely available prior to retirement and are not transferable, but they do contribute to households’ financial security in the long term. CBS has estimated the size of this pension capital based on life expectancy and expected return on invested pension contributions. After correction for inflation and expressed in constant (2020) prices, this averaged 151.5 thousand euros per household in 2021. The medium-term trend is neutral.

Dutch employees generally save for their pensions through their employers, who invest this money with a pension fund. The coverage ratio – the ratio of assets (pension capital) to liabilities (pension entitlements of all participants) – gives an indication of the funds’ ability to pay out current and future pensions. The financial position of pension funds improved in 2022. The coverage ratio was 115.9 percent in the fourth quarter of 2022, compared with 114.3 percent at the end of 2021. The pension supervisory authority stipulates a minimum policy coverage ratio (calculated as the average of twelve monthly coverage ratios). Pension funds with coverage below this threshold are required to implement a recovery plan to improve their coverage. This policy coverage ratio also rose, to 120.2 percent, an increase of 12.0 percentage points from the end of 2021.

Use concerns withdrawal of resources from accrued capital. For every 100 participants building up pension entitlement with pension funds in 2021, nearly 62 were receiving payments from these funds. The medium-term trend for this indicator is rising, and red. Not all workers save for their pensions through a pension fund. Unlike salaried workers, self-employed people are responsible for their own pension provision. In practice, some people in this group build up little or no pension, posing an additional risk to future well-being. The expected amount of work-related pension (estimated on the basis of median gross pension income of 65- to 74-year-olds) was slightly higher than amount of income from employment (approximated on the basis of median gross income from employment of 50- to 59-year-olds) in 2022. It only includes pension accrued during working years, i.e. excluding the AOW state pension provision.

Outcomes concern incurred debt and sustainability of financial systems. Dutch households had an average 106 thousand euros debt in 2021. The trend is rising (red) and the Netherlands is at the lower end of the EU rankings (22nd out of 24 countries). This indicator is calculated as the average debt of the sectors households and not-for-profit institutions on 31 December, and only includes debt from loans. The debts are consolidated, i.e. outstanding debts in the same sector are not included in the calculation. Opposite debt, households have savings and non-financial assets, such as their homes. The trend for savings is rising, which is positive for long-term sustainability of well-being. With an average of almost 66 thousand euros per household in savings, the Netherlands occupied a middle position in Europe in 2021. The above-mentioned data on debt and savings are based on the national accounts. This makes it easier to compare the Netherlands with the rest of the EU.

Data on mortgage debts of Dutch households are taken from CBS wealth statistics, which are not internationally comparable and are based on different concepts and definitions. According to these statistics, households with a mortgage loan had an average outstanding mortgage debt of almost 196 thousand euros in 2021. The amount of mortgage debt also shows a rising, red, trend. Mortgage debt refers to the outstanding debt on which interest is owed. Amounts accrued to repay the mortgage through endowment insurance policies, savings mortgages, and investment mortgages have been deducted.

More positively, the loan-to-value ratio on own homes of buyers younger than 35 years is trending upwards. This group, mostly starters on the housing market, is extra vulnerable. The loan-to-value indicator is a measure for the risk of remaining debt after sale of the property. A value of 0 means there is no outstanding mortgage debt on the property, a value of 1 means the mortgage debt is exactly the equivalent of the property value, and a loan-to-value higher than 1 means the mortgage debt is higher than the value of the property. The dashboard shows the median value: the value in the middle when all values are ordered from lowest to highest.

The Dutch government also builds up debt. Although government debt in the Netherlands is rising, GDP is rising by more ¬– mainly pushed up by inflation. At the end of 2022, government debt amounted to 54.3 percent of GDP, 1.5 percentage points lower than at the end of 2021. The trend is downward, and the share is significantly below the formal European ceiling of 60 percent of GDP. During the coronavirus crisis, at the end of the third quarter of 2020, the debt ratio peaked at 55.3 percent of GDP. Government support schemes to curb the effects of the pandemic for businesses caused a sharp rise in expenditure, while revenues lagged behind. The Dutch economy bounced back after the crisis, and the debt ratio is now approaching its lowest value since the credit crisis (48.5 percent at the end of 2019).

Subjective assessment concerns uncertainty about and confidence in the future. The percentage of people who say they are very worried about their financial future (responding with a score of 7 out of 10 in answer to the question ‘On a scale of 1 to 10, how often do you worry about your future finances, where 1 stands for never and 10 stands for all the time?’ rose to 28.6 in 2022. In 2021 this share was substantially smaller at 22.5 percent. The cost of living has rocketed in the last year, affected by historically high inflation – 10.0 percent. The medium-term trend has turned from decreasing to neutral. Opposite high inflation, on the other hand, the labour market situation is favourable, with relatively low unemployment and high job vacancy rates.