Dutch MP to table bill for annuity purchase reform
Helma Lodders, MP for the liberal VVD party in the Netherlands, has announced she will soon table a bill that would allow participants who retire under defined contribution (DC) pension arrangements to purchase annuities gradually.
Currently, full annuities must be bought in a one-off transaction at retirement, which has reduced pension benefits, given the low interest rates.
Lodders said participants in DC plans should not have to depend on a single window to make a purchase.
“Some would like to convert part of their accrued capital every year, while others would prefer a conversion every five years, or even variable and interest-related benefits,” she said.
According to the MP, participants require a number of options due to low interest rates.
Pensions adviser Aon Hewitt recently estimated that benefits from DC plans had fallen by 8% on average over the first quarter of this year and attributed the drop to falling interest rates.
In 2013, Lodders called on Jetta Klijnsma, state secretary for Social Affairs, to transform the temporary ‘pension click’ – providing for temporary benefits for a period of no more than five years, followed by a life-long pension – into a permanent one.
However, the temporary scheme, which ran between 2009 and 2014, was used by just 100 participants, whose pensions turned out to be lower than those of participants who followed the traditional route.
Lodders’s bill will also enable participants in DC schemes to keep investing with their remaining pensions capital after retirement.
The Dutch Cabinet is currently working on similar legislation, but Lodders said she doubted whether its bill could be tabled before Parliament’s summer break.