It would be “extremely undesirable” if pensioners were given the option of a carve-out or buyout in lieu of having their defined benefit (DB) accrued rights being converted to defined contribution (DC), according to Dutch social partners.
Representants of Dutch trade unions FNV, CNV and VCP as well as employers’ union VNO-NCW told the audience of trade publication Pensioen Pro’s annual congress last week that they believe buyouts or carve-outs are out of the question.
The buyout option would involve moving all accruals to an insurance firm, which in practice means the fund in question would be wound down. A carve-out would mean separating pensioners’ accruals from those of active members.
The Netherlands’ largest trade union FNV called this option “extremely undesirable” as it would in the long term be detrimental to returns.
“If you grandfather pension pots, it means no new money will come in so investment risk will have to be reduced,” said Willem Noordman, responsible for pensions at the trade union.
Noordman added: “Over the years, the population will just age further so risk will have to be dialled down progressively. Returns will shrink dramatically and the collective and solidarity benefits of the current pension arrangements will be lost.”
Patrick Fey of the country’s second-largest trade union CNV agreed. He said: “Building constructs that will slowly die off over a decade just doesn’t feel right.”
Employers union VNO-NCW also proved sceptical. Jurre de Haan, the organisation’s pensions expert, said moving rights to the new DC system is the standard option for all pension funds.
Social partners that want to take a different route will have to prove this option is not in the interest of a group of members. “And so far I haven’t seen any evidence that this is the case,” said De Haan.