A principles-based approach ought to replace the tight rules of the financial assessment framework in the Netherlands in order to create scope for innovation for a new pensions system, consultancy Aon Hewitt has argued.
Speaking at a conference in Amsterdam last week, Frank Driessen, chief executive of Aon Hewitt Netherlands, contended that a one-size-fits-all system would not be the solution for the current multi-cultural society.
An approach similar to that taken by the EU’s pension fund legislation, IORP II, would allow innovation for a new system, he said.
In his opinion, a principles-based assessment framework would offer more potential to modernise defined contribution arrangements, such as lifecycle investments based on participants’ risk profile.
Driessen’s vision of a new pensions system included the introduction of individual pensions accrual combined with collective investing - as is still being assessed by the Social and Economic Council – with participants choosing their risk profile.
The consultancy’s CEO also argued in favour of employers being enabled to select their pensions provider rather than the current mandatory participation in sector pension funds.
He said he was also in favour of allowing pension funds to pick their specific pensions contract.
A “hard stop” for the old pension arrangements would be crucial for a transfer to a new pension contract in the Netherlands, Driessen also argued.
This would avoid discussions about who would fit the bill and problems in merging existing pension rights accrued under the current arrangements with new pensions accrual under a new pensions contract.
Driessen also warned that, after 10 years of what he said were fruitless discussions about a new pensions system, the risk was real that “emotions in society” could force pension funds to respond in some way.
“We don’t want to end up in such a position,” he said.
The Dutch government wants to introduce a new pension model in 2020, but many in the industry doubt this is achievable.