Dutch proposal for pensions discount rate a 'dramatic mistake'

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  • Dutch proposal for pensions discount rate a 'dramatic mistake'

NETHERLANDS - Allowing pension funds to discount their liabilities against expected returns - as agreed in the Pensions Agreement - would be a "dramatic mistake", according to economist Sweder van Wijnbergen.

Speaking during a pensions event at insurer Aegon, he said adopting this criterion would almost certainly cause pensions schemes to go bust.

He said schemes would be tempted to grant indexation under pressure from other schemes that had decided to compensate for inflation.

However, social affairs minister Henk Kamp, who was also a member of the discussion panel, did not share Van Wijnbergen's concerns.

"The social partners, who govern pension funds, are not mess makers who take irresponsible risks," he said.

Although he acknowledged that parliament was to decide on the financial assessment framework, he stressed that the social partners deserved respect.

Jan Smit, chairman of the labour union federation CNV, described Van Wijnbergen's gloomy prediction as "too dramatic" and that he expected lawmakers to introduce a strict framework for assumptions for returns.

Van Wijnbergen, who is also professor at Amsterdam University, also said merging existing and new pension benefits would probably fail because it was likely to be at odds with property legislation.

Kamp also said he did not exclude the possibility that a benefits merger would turn out to be unfeasible.

However, Kamp and Van Wijnbergen agreed that a collective merger of old and new pension benefits was preferable to a "complicated" individual approach.

According to Jeroen de Munnik, Aegon's director of corporate and institutional clients, the benefits merger is crucial for the effectiveness of the Pensions Agreement.

Currently, the options of joining old and new pension benefits are subject of surveys commissioned by the minister of social affairs.

During the debate, Van Wijnbergen and Smit said political parties had failed to recognise the necessary increase of older workers' labour participation.

According to panel member and pensioner Maarten van Rossum, the government has failed to adopt this policy, as it is still actively trying to get rid of employees of over 61.

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