NETHERLANDS – The ending of the Netherlands’ pre-pension system will foster actuarial fairness, the International Monetary Fund says.

“The low labor force participation of older workers is another area where progress could be made,” the IMF said in a report on the Netherlands. “In this regard, the envisaged removal of fiscal incentives for early retirement is a positive step.”

“Ending the mandatory nature of collective pre-pension schemes will foster intergenerational and actuarial fairness.”

It said: “In addition, the authorities have announced that they will no longer extend certain elements of collective wage contracts to unorganized firms, notably the maintenance of pre-pension schemes.”

It said the decision “should provide further impetus to scaling back early retirement”. In addition, “changes in life expectancy should be taken into account in determining the retirement age”.

Insurance companies and especially pension funds, meanwhile, have been through a difficult environment in recent years, and remain exposed to any significant fall of equity prices. They have remained fairly liquid throughout, however, and are now in a rebuilding phase, underpinned by firm supervisory action.

Meanwhile, the Organisation for Economic Cooperation and Development has said that the rise in pension fund contributions in the Netherlands has “accentuated the economic downturn”.

The OECD said: “The increase in pension fund contribution rates from below the cost-covering level to above it has increased the “tax-like” element of contributions and hence the economic efficiency cost (i.e., excess burden) of pension arrangements and has accentuated the economic downturn.”

It added that the new supervisory framework in the context of the new Pension Act - which comes into force from January 2006 – would “reduce the risk of another large solvency crisis occurring”.

The OECD said: “The Principles of the Financial Supervision of Pension Funds that came into effect in March 2004 (and will be elaborated in the Pension Act) will require adequate buffers and should induce more prudent behaviour.”

Under the principles, an average pension fund is required to restore capital coverage of its nominal liabilities to 130% within 15 years. “These principles should keep the Dutch pension system sustainable,” the OECD said.

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