Dutch pension funds could introduce a sustainable pensions contract without the need for a high-level agreement or new legislation, several experts have claimed.

According to Mercer, the existing legislation for bringing in an improved defined contribution plan (Wet Verbeterde Premieregeling, or WVP) – with its option of variable benefits – already offered sufficient leeway for new sustainable pension arrangements in line with those discussed by unions, employers and government.

Last week, negotiations about pensions reform between the three parties broke down amid disagreement on secondary issues, including increasing the state pension age and bringing self-employed workers, or zzp’ers, into the pension system.

Other experts have backed up Mercer’s view, with Erik Lutjens, professor of pensions law at Amsterdam’s Free University (VU), arguing that government legislation was also not crucial for accommodating zzp’ers in the second pillar.

The WVP already complied with the conditions of a “simpler, tailor-made, flexible and sufficient pension”, as set out by Jetta Klijnsma, the former state secretary for pensions, at the start of the nationwide dialogue for a new pensions system in 2015, according to actuary Marc Heemskerk.

Speaking last week at a pensions seminar hosted by his employer Mercer, Heemskerk said that the current defined contribution (DC) pension plan offered by Shell Netherlands – comprising an accrual and a benefits phase but including the elements of collectivity and solidarity favoured by the unions – could act as a blueprint for a new system.

Heemskerk suggested switching to a pensions system with collective accrual for individual pension capital in a DC scheme in a pool, with participants having the option of picking their individual investment mix.

He highlighted that, in the accrual phase, such a “DC plan with investment choice” would lack the often disputed elements of financial buffers and discount rate for liabilities.

On the other hand, participants could benefit from the strong points in the current system, such as investment scale and solidarity through sharing investment risk, mortality risk and labour disability risk, according to the actuary.

In his concept, participants’ accrued individual pension rights would be gradually shifted to the benefits pool – with diversified investments and less risk exposure – between the age of 57 and 67.

If they had not opted to participate in the benefits pool beforehand, they could use their capital at retirement to shop around for benefits from an insurer, explained Heemskerk.

Dutch-Canadian pensions expert Keith Ambachtsheer has also voiced support for a “simpler and more adequate” pensions system with a pool for returns and a ‘safety’ pool.

Theo Kocken, Cardano

Theo Kocken, Cardano

Theo Kocken, founder of Cardano and professor of risk management at the VU, has proposed such a set up as well. When asked by IPE, he argued that the benefits pool with shared longevity risk would be possible under the current financial assessment framework (FTK).

Accrual in the return pool could take place “with less complexity and less discount rate discussions, and with less distrust among participants as a result”, he said, adding that “the options for tailor-made investments would increase”.

Kocken also highlighted that pension funds could implement both pools under the current rules for mandatory participation in a pension fund.

Discount rate

Heemskerk also suggested that the discount rate for liabilities – currently the market rate topped up with an ultimate forward rate (UFR) – could be replaced with the higher European UFR for insurers, which he described as “an objective quantity”.

He said that the application of EIOPA’s UFR would raise the average coverage ratio of Dutch pension funds from 108.6% to 114.2% at the moment.

In his opinion, such an increase would not be irresponsible “as the minimum required funding, and the trigger for rights cuts, for Dutch pension funds was 104.3%, rather than 100%”.

Recently, Gabriel Bernardino, chairman of EIOPA, indicated that pension funds could also apply the European UFR for insurers, as long as it complied with the local supervisory framework.

However, both Dutch regulator DNB and social affairs minister Wouter Koolmees have opposed the introduction of the European UFR for pension funds, with DNB even advising insurers to be cautious using the EIOPA rate.

Retirement age

The Netherlands’ state pension (AOW) age has been set by the government at 67 and three months from 2022, with subsequent rises linked to longevity – a decision strongly opposed by trade unions.

Heemskerk suggested that the dispute could be solved by taking 66 as the standard retirement age for workers facing a low pension income, usually people in hard physical jobs.

AOW benefits for people with better pensions perspectives should be proportionally discounted if they decided to take their occupational pension earlier than their retirement age for the AOW, he proposed.


At the seminar, Heemskerk also said he supported mandatory pensions accrual for self-employed workers “unless they can prove that they have sufficient pensions assets in, for example, their home or their company”.

Erik Lutjens, said a high-level pensions agreement was not needed for providing zzp’ers with access to second pillar pensions.

Instead, he said it could be achieved through a “simple legal change” aimed at allowing pension funds and low-cost DC vehicles (PPI) to implement pension plans for self-employed workers. The IORP II pensions directive already provided for this, he said.

As an alternative, zzp’ers could be forced to join an industry-wide pension fund in their sector, Lutjens said.

Meanwhile, the Dutch government has said it doesn’t expect negotiations about pensions reform to restart soon.

The largest trade union FNV, for its turn, has announced industrial action, with police officers and port labourers interrupting work for 66 minutes on 13 December.

Its aim is to put pressure on the government coalition through the provincial elections in March, as the county councils will then elect the new Dutch senate.