Dutch sector fears 'unworkable political compromises' for new system

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The Dutch pensions industry has voiced fears of “unworkable political proposals” for a new pensions system, if the sector doesn’t come up with proposals of its own.

Gerard Riemen, director of the Pensions Federation, warned that a government coalition agreement wouldn’t offer any footing for a sound system update.

Speaking to IPE’s Dutch sister publication Pensioen Pro, Riemen said his biggest worry was that a coalition agreement would contain “ill thought-out sentences” that “nobody knows how to implement”.

A new government is expected to comprise four or even five political parties, with widely differing views on a future pensions system.

As worst-case examples, Riemen cited “a pensions system with individual assets” or “we support a freedom of choice combined with full mandatory participation”.

“These kind of statements could be very paralysing, as they raise a lot of questions,” he said.

Riemen stressed that there was no margin for paralysis, “as millions of participants can’t be waiting in fear of rights cuts every year”.

In his opinion, employers and unions (known as the “social partners”) and the pensions sector should produce a plan before the formation of a new government starts.

Benne van Popta, employer chairman of the €67bn metal scheme PMT, agreed, arguing that an accord between these parties would offer the negotiating political parties a widely supported solution.

Earlier, Jetta Klijnsma, state secretary for social affairs, repeatedly urged the social partners to reach a deal for a new pensions contract.

She warned that, without a joint proposal, the social partners and the pensions sector would lose the direction, leaving the decisions to the negotiators for a new cabinet.

Representatives of employers and unions were reportedly in favour of waiting until after Dutch elections next month to announce a deal. They are thought to believe that announcing a plan during coalition negotiations would help avoid unwanted government interference.

Van Popta said that in the worst case scenario, with differing political views on pensions, there could be “a very complicated compromise which has to be implemented by the sector within a short period”.

Readers' comments (1)

  • The Dutch pension system has been one of the most sophisticated best managed in the world. It is sad to hear that it might be changed for an "individual" one.

    The system is the victim of its own success. On one hand, seemingly, it can afford lower final pensions. On the other, for reasons outside the pension system, young people - and the economy in large - need more resources now. So the easy solution is to channel contributions of the young to housing. But give them higher accruals at the same time. Is it possible? And here comes in - in theory - the life cycle saving argument saying "yes".

    But it is shown that fragmenting the portfolio leads lower investment performance in the long run. And there is something we are too shy to mention. Even if it was true that the young generations would gain by separating their portfolio from the older, then, the older generations would be worse off, in a zero sum "game" market.

    Every individualised system has a feature which has to never forgotten: the Pareto optimum, that paying in less [contributions] will never result in the same level of pensions, should be clear from the beginning.

    With regards

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