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The long and winding road of Dutch pension reforms has reached an interesting juncture: will the country stay true to its collective DB past, or turn into DC country?

After some five years of discussion and negotiations, the process of pension reform is entering a new and decisive stage. This spring, legislation will be introduced to modernise pension communications, requiring pension information to be more comprehensive and comprehensible.

Meanwhile, a new Pension Fund Governance Act aimed at bolstering stakeholder representation and governance quality is scheduled to take effect on 1 July, triggering an overhaul of the governance structure with its proliferation of governance bodies. A new financial framework (FTK) is in the works and, despite delays, should be introduced in 2015, if not by 1 January as first envisaged.

With communication, governance and financial framework issues taken care of, the Dutch are turning their attention to more fundamental issues – specifically, the question of what kind of a pension system they want for themselves, their children and their children’s children. State secretary for pensions Jetta Klijnsma announced last October that a discussion was in order and a December policy review by the Ministry of Social Affairs and Labour also called for a debate among all stakeholders.

This is shaping up to be a groundbreaking debate as, for the first time, the Dutch seem willing to entertain the notion of individual DC as a worthy alternative. Research institute Netspar has dispatched two working groups to explore sustainable pension contracts, one of which focuses on DC. Political parties such as the Christian Democrats are calling for a DC-based system. Even Gerard Riemen, director of the association of pension funds, Pensioenfederatie, has said it is unwise to maintain a rigid distinction between DB and DC as the belief that DC is “necessarily all bad” serves only to paralyse the debate.

This is not to say that the Dutch are all of a sudden ready to embrace DC. Despite their differences, factions agree that pension savings should be managed collectively, participation should be largely mandatory, and any system should include some form of solidarity and protections for vulnerable participants. It will be interesting to see whether this will yield a ‘Dutch-style’ individual DC system retaining the age-old Dutch values of collectivity, solidarity and mandatory enrolment.

 

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