Dutch must discuss higher retirement age – DNB
NETHERLANDS - Dutch society should start discussing the gradual rise of the retirement age from 65 to 67, to compensate for population ageing, said central bank president Nout Wellink (Corrects organisers in 2nd paragraph).
“Although ageing in the Netherlands happens at a slightly lower pace than in the neighbouring countries, starting preparations now is the best way of avoiding shocks in the system,” Wellink told a conference organised by ABP and PGGM in Schevingen. The DNB is also the pensions regulator.
A rise in the retirement age should include the possibility of individual flexibility and, hence, freedom of choice to the level of pension benefit, Wellink added. He suggested tax allowances could ease the pain.
He pointed out the decreasing effectiveness of contributions as a way of absorbing setbacks, caused by the ageing of the population, and the subsequent conversion of many pension arrangements from final to average salary with conditional indexation.
“Through this development our defined benefit system seems to be shifting to defined contribution,” Wellink concluded.
“However it certainly still isn’t a DC system in all respects. In a DC system the risks are entirely borne by the individual workers, while average pay schemes are characterized by risk sharing and intergenerational solidarity.”
Meanwhile, UK pensions expert David Blake predicted that the markets would force the Dutch pensions industry out of its DB system. “A 150-year build-up of DB plans in the UK has been wiped out within five years,” he said.
“Because of the massive volatility caused by the accounting rules of FRS17, the liabilities of a defined pensions plan can be larger than the market capitalisation of the sponsoring company. Shareholders will force companies to shut down their pension plans,” Blake told IPE.
Earlier during the event an overwhelming majority of the representatives of the Dutch pensions industry had shown faith in the future of their DB system.
“We shouldn’t give up DB too easily, because the full scale DC doesn’t seem to work properly either,” said Karel Noordzij, chairman of health care scheme PGGM.
During the discussions however some representatives of company pension funds made it clear that they are expecting a move to some kind of DC system.