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Dutch pensions accrual 'often insufficient', professor warns

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The current tax-facilitated pensions accrual of 2.15% a year in the Netherlands is in many cases “insufficient”, even without taking into account the Cabinet’s mooted accrual decrease, an economics professor has argued.

Kees Goudswaard, professor of applied economics at Leiden University, said almost 30% of Dutch workers over 35 years of age would fail to achieve the level of 70% of their average salary if they only depended on their state pensions AOW and second-pillar scheme.

Speaking at a recent seminar held by asset manager APG on generational issues, he added that 12% of over 35s would fail to achieve even 70% if third-pillar arrangements, private assets or owned property were taken into account.

On average, self-employed workers, divorced women and first-generation immigrants will end up with even less, he warned.

Recently, the Dutch Cabinet withdrew proposals to reduce the annual tax-facilitated pensions accrual to 1.75% – meant to save several billions for the national budget – after the Senate rejected the proposal.

It is reviewing its plans at the moment.

Goudswaard said his conclusions were based on the outcome of joint studies in Leiden, pensions research network Netspar and the Organisation for Economic Co-operation and Development (OECD).

The studies have also revealed that the assets of over-65s were significantly higher on average than those of younger people, and that this would be unlikely to change over the next 12 years, Goudswaard said.

In his opinion, this would be a reason to consider solidarity from older workers with their younger colleagues, including the option of an increased pensions accrual for younger workers, rather than the current average contribution-based accrual.

He also suggested that the often-disputed value transfer from younger to older workers, implicit in the current system, was not a problem.

“When younger workers grow old, they automatically assume the role of receiver,” he said.

Also during the seminar, Dick Sluimers, APG’s chief executive, warned the pensions sector against “going too far” in seeking solidarity solutions.

“There are many more kinds of solidarity, such as between men and women, poor and rich workers and smokers and non-smokers, who all have different life expectancies,” he said.

In his opinion, solidarity is a matter of give and take, and pension funds should refrain from trying to accommodate all these different solidarity elements into a single pensions plan.

“This will never work,” he said. “There will also be open ends. Therefore, we should focus on the kind of solidarity we really want to keep.”

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