NETHERLANDS - The Netherlands' Pensions Agreement will not be enough to restore public faith in the pension system, as it fails to provide for individual choices or a reliable collective approach, according to economists.

The gap between employees' expectations and their ultimate pension must be bridged by giving them a better insight into their future benefits, said Sweder van Wijnbergen and Paul Tang in a study commissioned by Holland Financial Centre, an initiative of the financial sector.

According to the economists, a low but possibly rising discount rate is necessary to prevent younger workers contributing disproportionally to pension costs.

They concluded that, under the new pension accord, they are likely to pay for a quicker indexation for their older colleagues, following a higher discount rate and a lack of financial buffers.

In their opinion, the tax-facilitated pension accrual must be capped, as higher-educated workers will benefit more from their pensions than lower-educated employees because of their higher life expectancy.

The economists also pointed at the importance of adjusting the official retirement age to longevity as soon as possible.

"In contrast to market developments," they said, "longevity is a lasting phenomenon."

In their report, the economists also advocated an option of early retirement - after means testing - for employees in bad health and without additional income.

Van Wijnbergen and Tang also concluded that employees should be able to save extra for their pension when they were halfway their working career.

Furthermore, the current default dismissal at the official retirement age must be replaced by discharge at the maximum allowed retirement age, to enable workers to increase their pension rights by working longer, they said.

In the opinion of the economists, concrete measures are necessary to keep older employees in a job.

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