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Dutch employers warn pensions must be cut

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  • Dutch employers warn pensions must be cut

NETHERLANDS - Dutch employers have called on pension arrangements to be cut, as the rapidly rising costs are said to be damaging the competitiveness of Dutch companies.

"Based on existing agreements, sponsoring companies need to pay between €5bn and €10bn of additional contributions to pension funds with a funding shortfall in 2009, whereas they already pay two-thirds of [total] premiums," argued Gerard Verheij, pensions negotiator of VNO-NCW, the employers' representative body.

Energy giant Shell recently announced, for example, that it will pay an extra €2bn in contributions into its hard-hit Dutch pension fund.

However, Verheij believes the present situation is not sustainable.

"The financial assessment framework FTK for pension funds is based on a major financial problem once in forty years, but now we are in such a situation for the second time within six years," he argued.

"If we don't act now, we might end up with undesired individual defined contribution arrangements, like those of many employees in the United States."

VNO-NCW wants to agree more frugal pension arrangements with the unions, without abandoning the much-vaunted principles of solidarity and collectivity of the Dutch pension system, stressed Verheij.

Employers think all elements of pension arrangements should now be up for discussion but as an opener VNO-NCW wants schemes to agree to a contributions cap of 20% of pensionable salary, he revealed.

"A rise [in contributions] to 25%, as we are seeing at the moment, is unacceptable. Companies, and multinationals in particular, are making it clear that something needs to be done to stop the spiralling pension costs in the Netherlands. If nothing happens, they might come up with their own arrangements," stated Verheij.

The association has also suggested pensions should be reduced to a standard rate of 70% of pensionable salary, as a combination of employees working longer and a higher pension build-up has led to pensions being worth of 80% or 90% of the average salary.

VNO-NCW also believes that both the official retirement age and the franchise -  the part of the salary which is excluded from the build up of a pension and over which no contributions are being paid - should be raised.

Following the first pension crisis suffered at the start of this century, employers and unions agreed to economise on pensions by changing plans from final salary schemes to average salary arrangements.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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