Last month the Dutch caretaker government introduced a new set of rules for pension funds designed to avert dramatic benefit cuts and contribution hikes. The so-called ‘September package’ represents a typical Dutch compromise – it offers something for everyone, everything for no-one, and nothing for free.

Some benefit cuts will be prevented, but not all – the country’s largest pension fund, €261bn ABP, has warned that it may yet have to slash benefits by up to 5% in 2014. Mandatory contribution hikes will be limited to some €200m, just a fraction of the €3.8bn increase projected earlier, but still a sizeable chunk of change at a time when the economic outlook is uncertain and money is tight.

And while pension funds may now discount their long-term liabilities at an ultimate forward rate rather than the painfully low swap rate, the buoying effect on funding rates is tempered by the regulator’s decision to gradually phase out market rates between durations of 20 to 60 years, continuing to take market information into account well beyond the so-called ‘last liquid point’.

Of course, the September goody bag comes with a price tag attached. As the Dutch are fond of saying: ‘Voor niets gaat de zon op’ – if you want something for nothing, go watch a sunrise.

Pension funds wishing to make use of the options to spread benefit cuts and tailor contribution levels, may do so only if they agree to make changes to their scheme in return. They are to implement a ‘life expectancy adjustment mechanism’; raise the pensions age; and forfeit the right to pay inflation compensation at funding levels below 110%.

Not coincidentally, these are all elements of the pensions system overhaul proposed by
outgoing labour minister Henk Kamp. On closer inspection, the goody bag contains a carrot and a stick.

The new Pensions Act has yet to be drafted, much less passed. But there is nothing to prevent pension funds ‘voluntarily’ committing to such pre-emptive measures, according to state secretary for social affairs and labour Paul de Krom. By means of its terms and conditions, the September package is, in fact, ushering in the first stage of pension reform.