De Nederlandsche Bank (DNB), the Dutch regulator, has reiterated its support for a new pensions system with individual pensions accrual.
Financial buffers in any new set-up, however, should be as limited as possible to avoid future squabbles over who is entitled to the reserves, it said in a statement.
The regulator also asserted that individual pension rights and age-dependent investment policies would be “crucial” building blocks in building a sustainable pensions system.
Last year, DNB produced a memorandum in which it called for the abandonment of average contribution, as well as average accrual.
In its latest statement, however, it allows for a collective buffer on the condition that it remain limited in scale and “cannot be negative”.
In an interview with Dutch news daily De Volkskrant, Job Swank, director of monetary affairs and financial stability at DNB, confirmed that a collective buffer would be considered “if this were considered important to the unions”.
He noted, however, that the added value would decrease if financial reserves exceeded 10%.
This is much less than the maximum of 30% employed by the Social and Economic Council (SER) in its survey or the 20% applied by the Dutch Bureau for Economic Policy Analysis (CPB) in its comparisons with other pension contracts.
A collective buffer implies risk-sharing with future generations.
In its last year’s memorandum, DNB said the limited benefit of such a reserve failed to outweigh potential drawbacks, such as conflict over how the buffer should be divided up.
“Risk-sharing with future generations” the regulator warned at the time, “comes with governance risks, as well as discontinuity risks.”
Meanwhile, Swank said that increasing options for participants or widening the scope of mandatory pension savings were no longer a priority for DNB, which seeks to expedite the decision-making process.
He said these and other elements could be added at a later stage.