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The Dutch government is looking to replace average pension contributions with ‘degressive’ premiums to make the system fairer for younger participants. 

In a memorandum to Parliament outlining the future of the Dutch pensions system, Social Affairs secretary Jetta Klijnsma said the “gradual dismantling” of the average contribution system would begin in 2020.

In a degressive system, younger workers pay proportionally smaller contributions because their paid-in premiums are expected to generate greater returns over a longer period than those of older participants.

In her memorandum, Klijnsma said she would work with the pensions industry, companies and workers on how best to bring about a “balanced transition”. 

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She made clear that one of the conditions for the transition would be the removal of various legal barriers – European and international – including mandatory participation in a pension fund.

The Actuarial Society has said the cost of such a transition would be approximately €25bn, whereas the Dutch Bureau for Economic Policy Analysis’s estimate is closer to €100bn.

Klijnsma’s memorandum also indicated that the government supported the “interesting yet unknown” variant of individual accounts with a degree of risk sharing, as recommended by the Social and Economic Council.

However, the Cabinet stressed that such an approach must be “transparent and balanced and contribute to the pension outcome”.

The Dutch government said further “elaboration” of current pensions contracts would be the next best option if its preferred proposal could not be achieved.

Another major point of the memorandum was that every worker, including the self-employed, should be able to accrue a sufficient additional pension through “a kind of mandatory participation”.

The government said it any new pensions system should pay more attention to the dynamics of the labour market and the changing roles of workers.

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