New Dutch pension system could take up to 10 years: Pensions Federation
The introduction of a new pensions contract in the Netherlands is going to be a long term process which could last up to 10 years, the Pensions Federation has claimed.
Speaking to IPE, Gerard Riemen, the sector organisation’s director, said that it would almost be impossible to start the transition process at the pension fund level in 2020 as scheduled.
He noted that the Social and Economic Council (SER) still hadn’t produced a final proposal, which must be translated into legislation and approved by the Dutch parliament.
“Because the necessary changes will exceed the available ICT capacity, pension funds can’t work simultaneously on the transition to a new contract,” he said.
Responding to the collapse of the negotiations for a new coalition government, Riemen said the SER should go ahead with fleshing out a new pensions contract, as an alternative for the current predominantly defined benefit plans, which are becoming unaffordable.
Over the weekend, four-way talks between the Liberals, the Christian Democrats, the D66 party, and the Greens were called off without an agreement to form a coalition.
One of the alternatives the SER is considering comprises individual pensions accrual, while the other is a “target contract” for accrual in real terms, with a degree of risk sharing in both contracts.
The expectation in the sector is that the SER will deliver a proposal for a combination of both options.
“I reckon that also the outgoing cabinet will take the coming SER advice seriously and will carry on developing legal proposals, subsequently to be approved by the new parliament,” said Riemen. “This would be perfectly democratic.”
However, the Pensions Federation director has also voiced concerns about a new system. Recently, during the transatlantic conference of the European Association of Paritarian Institutions (AEIP) in Montreal, he said there was a risk that people would not understand the new system.
“We have €1.2trn of investments and we first have to transfer the liabilities to personal accounts and then to annuities,” Riemen said.
“The second big danger is that politicians and social partners do not take any decision and nothing happens. In the end we will see a deterioration of our defined benefit system if this goes on, and I don’t know what the outcome will be.”
Commenting on the collapse of the coalition negotiations, Toine van der Stee, chief executive of pensions provider Blue Sky Group, said he didn’t expect anything from the negotiations for a new pensions system.
“I assume that the politicians [will] wait for the view of the social partners of employers and workers, who seem to have reached a reasonable concensus about the direction,” he said.
Van der Stee added that he expected the sector itself would change the pensions system if politics didn’t speed things up.
As examples, he cited the increasing introduction of collective defined contribution schemes as well as arrangements regarding contribution increases and risk sharing.
Peter Borgdorff, director of the €187bn healthcare scheme PFZW, was taciturn about the collapse of the coalition negotiations, suggesting that new talks for a government coalition could be completed within three weeks.
“The most important is that the SER comes up with solid proposals,” he added.
For IPE’s in-depth look at what the different political parties want for the pensions sector, click here.