The Dutch government will not pressure the European Central Bank (ECB) to reduce its quantitative easing (QE) programme in order to push up interest rates, Dutch finance minister Jeroen Dijsselbloem has said.
Speaking at a debate in the Dutch Parliament, Dijsselbloem took pains to emphasise that the government was adhering to the principle that central banks should be independent.
Responding to a motion tabled by Christian Democrat MP Pieter Omtzigt, Dijsselbloem said low interest rates were “patently not the ECB’s fault” and argued that they had been falling gradually in Western economies for the last 20 years.
Citing the UK and Japan as examples, he also argued that QE was “not an extraordinary financial instrument”.
For his part, Omtzigt had said he wanted to prevent low interest rates from causing further damage to the predominantly capital-funded pension system in the Netherlands.
He said he feared that the Dutch state – with its own central bank DNB being a stakeholder in the ECB – ran an increasing financial risk due to low rates.
According to Omtzigt’s estimates, a 0.3% drop in rates would immediately increase combined Dutch pension liabilities by €45bn, while a drop of 1% would increase liabilities by €165bn.
He warned that the gradual impact of the ultimate forward rate (UFR) – part of the discount mechanism for liabilities – stood to increase these liabilities to €75bn and €220bn, respectively, in 10 years’ time.
If pension-fund participants were to account for these increased liabilities through rights discounts over a 10-year period, it would cost them each, respectively, €600 and €1,800 a year, Omtzigt said.
At the same time, he said, a 0.3% drop in interest rates would cause cost-covering contributions to jump to €2bn, and – also owing to the UFR’s impact – double to €4bn in 10 years’ time.
In another example, he pointed out that, at present, a 27-year-old had to pay 145% more to reach a pension target of €100 when compared with 2008, when interest rates were at more than 4%.
A 62-year-old worker, Omtzigt said, today faces a 25% cost increase to meet this same goal.
Dijsselbloem, however, ignored the MP’s call to investigate the impact of low interest rates on the Dutch pension system.