If Social Affairs minister Aart-Jan de Geus doesn’t want to endorse our new pension scheme, we could start offering services from abroad. It’s now easy to operate as a foundation from, for example, Ireland. But it will definitively be a disgrace to Holland, which prides itself on its innovative approach on pensions.”
Martin Pikaart, vice-chairman of the new Alternative Labour Union (AVV) is clear about the AVV’s determination to start its own pension scheme. “Social Affairs is not going to stop us. We have Europe on our side.”
The much criticised pre-pension settlement, which caused such dissension among young civil servants, also led to the creation of the AVV in a parallel development. Few of its founding members - their ages range from 27 to 38 - have a government job, and members include lawyers, engineers and freelancers.
Pikaart, who is 37, summarises the discontent which led to the creation of the AVV: “The pre-pension agreement has been undemocratically concluded, by the votes of no more than 500 union members, whereas it will be applied to over a million ABP members. The unions only take notice of their ageing rank and file. And the explanatory figures afterwards of pension fund ABP, as the largest partner within the agreement, were very unsatisfactory”
Until he devoted himself full time to the AVV, Pikaart worked at the technical research institute TNO. He was a board member of the company pension fund, and the leader of the workers’ council negotiating on the collective labour agreement, or CAO. He is still an executive member of union AbvaKabo. “They actually still don’t know what to think of the AVV, and how to deal with us,” he says.
Pikkart says the rise in pension contributions over the past years has not been necessary. “They have been caused partly by the ‘contributions holidays’, which the baby-boomers have awarded themselves for years, and partly by the bad investment years 2001 and 2002,” he says . “The younger generation is supposed to pay now, in order to build up sufficient buffers.”
The AVV argues that the present legislation on the early retirement schemes of VUT, pre-pension and ‘levensloop’ are unfair. “Young workers will be paying significantly for years for something they will never benefit from. The over 55s will hardly hand-in anything in return,” says Pikaart.
“The social partners only take care of the older colleagues. Most of the unions’ members are over 55s. They wrongly claim a right to a tax-friendly prepension scheme, which they haven’t paid for. We are preparing for a definitive battle in order to reverse the prepension settlement with the vote of every worker, not just union members.”
The AVV’s view on decision-making is clear, he says. “We want CAOs decided by the vote of every worker within their sector, not just by a few union executives in smoky back rooms. The internet offers sufficient possibilities for remote voting.”
Pikaart says the AVV is targeting the groups that have traditionally been ignored by the existing workers’ organisations. “I’m mainly talking about freelancers and people with temporary contracts. They have always been at a disadvantage, as it is more difficult for them to get, for instance, a mortgage, compensation for childcare, incapacity benefit or to build up a pension. The law usually considers freelancers as employers and employees at the same time.”
AVV has pledged to support these people, which it estimates number over 700,000, by lobbying in parliament and by agitating in society generally. One of the key issues is proper pension arrangements for ‘the outsiders’, as Pikaart terms them.
Currently, Dutch pensions provider and asset manager Cordares is developing a pension product for AVV’s pension scheme OPen. “It will be a defined contribution scheme, because we don’t want any redistribution of income as under defined benefit arrangements,” says Pikkart.
“We have chosen Cordares, because it offered us the best deal. They are looking for expansion and innovation, and we fit in well within this philosophy. And of course, Cordares have the expertise by working for a million employees of 25,000 companies, and are managing e23bn of assets. Cordares’ average returns over the past 10 years are 9.5%. That’s a better result than ABP’s.”
Cost-cutting will be central in order to get attractive arrangements for the target group. “We will keep the costs down by communicating to the members via the internet instead of paper mail, and by operating a virtual office. And we don’t need to make any profit, like the insurance companies.” So far, the two full time staff - Pikkart and chair Mei Li Vos - have been working on a voluntarily basis.
In AVV’s plans, its pension scheme will be a non-mandatory one, and will be open to freelancers, self-employed and workers without pension promises, whether they are working in Holland or abroad. Its name is simple and clear: OPen. Within the Dutch pension system it is unique. That’s the reason why it doesn’t seem to fit within any of the existing umbrella organisations.
“The scheme will be transparent and simple, and will take into account the varying income of the self-employed,” Pikaart emphasises. “Members can decide every year how much they contribute, in which funds they want to invest, and what their retirement target will be. They can also choose which part of their investment is meant to generate a guaranteed return, and which part will be investment-dependent.
“The deposited money will stay with the individual participants which is, in our opinion, the greatest advantage of our scheme, which I’d like to describe as ‘new and Dutch-style defined contribution’.”
Participants in OPen can’t expect many options though. “Dealing with the exceptions usually raises the costs,” Pikaart explains. Members will be able to check their situation any time via the internet.
The founders of the fledgling union are fully aware that several hurdles still need to be cleared, before AVV is properly up and running. It is not only the Social Affairs’ minister’s endorsement of the open and non-mandatory pension scheme. They are also waiting for the confirmation from Finance minister Gerrit Zalm, that the pension contributions will be tax-exempt.
There is also the issue of the size of the AVV. The present membership of just over 2,000 members offers few economies of scale at the moment. Although Pikaart says he cannot give a number, he admits that the founders had been expecting ‘many more’ subscribers. The yearly membership fee of e10 - deliberately kept low - does not help. “We are short of cash, that’s why volunteers are still running our operations,” he says. “But that’s not meant to go on forever.”
To get more clout, the AVV is trying to get involved in negotiations on collective labour agreements, or CAOs. This is not always easy, says Pikaart: “In many cases, covenants - often sanctioned by the relevant minister - between employers and existing unions, block us from taking part in the discussions.”
So far, the AVV has had dozens of enquiries from people who are interested in participating in the new pension fund.
Pikaart is not yet convinced though that the fledgling scheme will make a start from a base in Holland. “Although both the pensions regulator De Nederlandsche Bank and the finance ministry want Holland to become an international place of business for pension funds, and the EU directive on occupational pension funds offers the opportunity, minister De Geus has the final say on the set-up that we have in mind.”
Among the other pension issues on the AVV’s ‘election programme’ are a longer recovery period than a year if the funding ratio of a pension fund drops under 105%, and taxation of the state pension AOW of pensioners with a generous additional pension. “The government should also stop the job protection of employees with a salary over e45,000, in order to get rid of bonuses and outrageous pension claims of top managers,” it states. “Moreover, the government should allow non-mandatory and independent pension funds, in which workers can participate on a voluntary basis.”