Just how effective has the Dutch 'polder' approach to pensions reform been? IPN editor Mariska van der Westen wonders.

In October, the Dutch pension system was named the best in the world for the third year running by the Melbourne Mercer Global Pension index. But despite its top ranking, the Dutch system scored less on adequacy and sustainability than the previous year, and its overall index value slipped from 78.3 to 77.9. In the Netherlands, as elsewhere, pension provision is under threat from a rising tide of troubles, including an ageing (and long-lived) population, low interest rates and fretful financial markets.

With most of the population living well below sea level, the Dutch know a thing or two about the danger of rising tides, and after the 2008 crisis, it was clear that no little Dutch boy would suffice - a wholesale redesign of the dikes was in order. Such reforms are well under way. The problem is that few people can make sense of them.

While the need to overhaul the system was recognised as early as 2009, and a general reform plan was agreed in the spring of 2010, for the past year and a half, the plan has been tinkered with, amended, rejected and revised so many times that, by now, it's hard to say which way is up. Foreign observers, in particular, are perplexed by the convoluted decision-making process and endless 'one step forward, two steps back' negotiations. The Dutch are quick to explain they are simply exercising the so-called 'polder model', as they do with all matters of great import. It's an explanation that is apt to draw more blank stares than 'ahas'.

Much of the Netherlands qualifies as polder, also a proper English word according to my dictionary - pol·der: a tract of low land (as in the Netherlands) reclaimed from a body of water (as in the sea). As the saying goes, God created the world, but the Dutch created Holland. While they were at it, they took the noun and turned it into a verb. To 'polder' means getting all stakeholders involved in the decision-making process and hammering out a compromise everybody can live with.

In the case of pension reform, trade unions, employer organisations, regulators, supervisory agencies, academics, senior citizens and representatives of the younger generations all have a say. Although the Dutch have now poldered their way to consensus on the broad outlines of reform, challenges remain - not least, how past accrued benefits can legally be absorbed into a new, conditional system. And all the while the water keeps rising, with many pension fund coverage ratios now well underwater. It remains to be seen if the Dutch manage to bolster the dikes in time to turn the tide.


Mariska van der Westen is editor of IPE sister publication IPNederland