Last Friday, ABP’s defined contribution (DC) transition plan was rubber-stamped by Dutch central bank DNB – a key moment not only for the €518bn pension fund, but in the ongoing transformation of the Netherlands’ giant occupational pension system away from its traditional defined benefit (DB) basis.
At the giant civil service pension scheme – the Netherlands’ biggest pension fund making up a third of all Dutch pensions capital – executive board member for pensions Yolanda Verdonk-Van Lokven said: “DNB’s approval marks a significant milestone for us in the transition to ABP’s revised pension scheme.”
“We’ve spent the past few years working towards this in an intensive process involving many parties,” she said, while pointing to more work ahead of the actual transition on 1 January 2027.
ABP would continue working closely with employers’ organisations and trade unions and the Accountability Body (VO), she noted, and was monitoring developments to ensure a careful transition.
Supervisory authority DNB is playing a key role in the enormous process of transitioning most of the country’s accrued occupational pensions capital and future contributions onto a collective DC basis from the DB arrangements that eventually proved too problematic.
“One of DNB’s tasks is to ensure that the transition to the revised pension scheme works out as fairly as possible for everyone with an ABP pension,” said Verdonk-Van Lokven.
Dutch pension funds are moving to quite a different DC model from those used in other countries, and can choose between two arrangements, which both retain some degree of solidarity and longevity risk sharing, as well as collective investments and a risk-sharing buffer.
The changes to the product will also involve modified investment policies for the pension funds, with risk levels as well as illiquid investment weightings expected to be stepped up.
Across the Netherlands, the transition is well underway. Out of the 140 Dutch pension funds, 111 were or are engaged in the transition, according to the Dutch Federation of Pension Funds (Pensioenfederatie), because a small number of corporate and/or closed pension funds will remain in the previous system – although most of those 29 will be sold to a pension-insurance company.
To date, 44 pension funds have received approval from DNB, according to the federation, and of those, 42 have made the transition successfully, which includes three of the largest five Dutch pension funds, PFZW, PMT and BpfBOUW.
“Thus more than half of the Dutch employees and pensioners – seven million out of 13 million total – have already arrived in the new pension reality without incident,” a Pensioenfederatie spokesman said.
While the government, trade unions and employers actually reached an agreement over the pensions reform in 2019, the process has unsurprisingly had its delays. By 1 January 2025, just three pension funds had completed their transfer of accrued rights, according to DNB, but over the following 12 months, significant momentum built.
Last year, a law was passed setting a firm deadline for pension transitions of 1 January 2028.
“Based on the most recent planning provided by pension funds, 83 funds [including pools] are expected to have completed the transition by 1 January 2027,” a DNB spokesman told IPE.
The remaining funds will make the transition by 1 July 2027 or at the last possible date of 1 January 2028, according to Pensioenfederatie.
At the start of this year, DNB reported some funds had needed to postpone their intended transition date because more work was needed on particular issues.
“With a transition of this magnitude, it is inevitable that parties will face challenges,” the bank said, citing the provision of “a robust justification for the balanced nature of the transition” and implementing the necessary IT systems as two examples.
Fieke van der Lecq, government commissioner for the pension transition and professor of pension markets at Vrije Universiteit Amsterdam, recently praised the pension sector for having demonstrated great unity in ensuring the success of what was a massive transition project.
In the introduction to a large bundle of studies on the DC transition – the WTP (Wet toekomst pensioenen, Future Pensions Act) reform – released on 25 June by Netspar, the Tilburg University-based knowledge network around pensions, ageing, and retirement, van der Lecq said: “That constructive attitude will remain essential in the coming years if the final transition deadline is to be met.”
Major projects elsewhere had frequently gone off track in terms of timing, quality, or cost, she warned, saying that this project “cannot afford major failures in any of these areas, as the participants and insured individuals would ultimately bear the consequences.”
But despite challenges, she concluded that “the impressive commitment shown by so many to date inspires hope for a successful outcome,” adding firmly: “This overhaul will succeed”.
Pensioenfederatie is also upbeat. “We are happy to look back on 18 months of actual transition without incident,” the spokesman said.
“On the contrary, more than half of all Dutch employees and pensioners are enjoying an 8–20% pension income raise. All signs for the immediate future point to a continuation of this very satisfactory trend,” he told IPE.
