The Dutch Pensions Federation has said that the two options for a new sustainable pensions contract deemed “interesting” by the Social and Economic Council (SER) are feasible.
In an official response, the industry organisation said further elaboration, together with the SER, could produce a widely supported alternative for a “robust, comprehensive, fair and future-proof” pensions system.
Earlier this year, the SER produced two alternatives for a new pensions system, comprising a “target” contract for a pension in real terms and a set-up of individual accrual, both with collective risk-sharing.
Jetta Klijnsma, state secretary for social affairs, has also approved both options.
The Dutch Pensions Federation said it wanted investment and macro longevity risk included in the risk-sharing arrangements.
In recent months, four working groups have assessed the SER’s options on pension returns, viability, communications and legal and fiscal aspects, assuming the current average approach is replaced with fixed contributions and the age-dependent degressive accrual of pension rights.
They concluded that the target variant scored better on participant protection and prosperity benefit but might be susceptible to legal challenges following the introduction of an age-dependent degressive accrual.
The working groups concluded that individual accrual was much easier to explain than the concept of pension rights but said this variant would offer less protection or collective risk-sharing.
“As a consequence of the latter, the case for mandatory participation in a pension fund would be weakened,” they said.
Gerard Riemen, the Federation’s director, took pains to emphasise that the study had focused on a “hard feasibility check” based on data provided by 10 pension funds.
In its letter to the SER, the industry organisation said new legislation should offer pension funds the choice between transferring existing arrangements into a new pension plan and keeping them in a closed scheme.
The Federation also called for simplifying the current fiscal framework for a new pensions contract.
Riemen said it was up to workers, companies and the SER to fine-tune a widely supported pensions contract, adding that it should be feasible to present a fleshed out version in early 2017.
Meanwhile, Dutch supervisor DNB warned that the development of a new pensions system should not be used to introduce “too many new elements, as the transition to a new pensions contract in itself is already complicated”.
The regulator referred to the freedom for individuals to select a pension fund and the use of part of the pensions contribution to pay off mortgages, as several political parties have promised in their election manifesto.
According to DNB, even without the additional elements, the transition would demand much from pension funds in terms of preparation and ability to change.
It said its supervision next year would pay additional attention to pension funds’ ability to “adjust in a dynamic world”.