NETHERLANDS – Wim Duisenberg, the former president of the European Central Bank and its Dutch counterpart, says the Dutch pension system has a bright future.
“We are better prepared for the ageing of the population than some countries around us, especially those in southern Europe,” he claims in the magazine ABP World.
While voicing concern about the lending driven monetary policy of the US, he draws a parallel to the pensions sector.
“The only remedy against risks is taking good care of yourself,” is his advice to pension funds and other institutional investors as well. “The greatest threat for pension funds is giving in to the pressure of taking too high risks, especially nowadays when high returns are rare.
“I think especially the large institutional investors, who have access to the global financial markets, will quite be able to harness themselves against financial instabilities,” Duisenberg added.
The former ECB president doesn’t think that the developments in the markets – globalisation, speed, depth and scale – have made the financial risks worse.
“The present markets have become more accessible and the sources have become larger. This happened in Europe partly due to the euro, though the integration of the markets for capital, shares and bonds is slower than the money market. That’s what has changed the world for pension funds as well.”
“As a finance minister I always resisted ABP substantially investing in shares and the same goes for investing abroad. But this is much less relevant now, since the euro and the developments of markets where the currency risks can be covered.”
According to Duisenberg the recent merger of the Dutch central bank DNB and the pensions watchdog is “a masterstroke”.
“I have always held the belief that central banks should have an important role at watching all financial institutions.” He predicts a ‘cross-pollination’ between DNB and watchdog and a more intensive and proactive supervision of the pension funds.
Given the potential cost savings, Duisenberg expects more consolidation among Dutch schemes.