GLOBAL - The International Monetary Fund (IMF) has commended the Dutch pensions system for the explicit factoring-in of longevity risk within the Pensions Agreement hammered out last year between the government, employers and workers.

In its Global Financial Stability Report, the IMF said: "The flexibility permitted by this deal is exemplary and provides potential guidance to other countries facing similar longevity issues."

The IMF referred to the linking of the effective retirement age to predicted developments in life expectancy.

The Pensions Agreement provides for an increase of the retirement age for the AOW state pension to 66 in 2020, with further adjustments every five years in line with longevity projections.

Recently, however, a majority in parliament decided to increase the official retirement to 66 in 2019, followed by a rise to 67 in 2023, when the pensionable age will be linked to life expectancy.

In 2007, a new Pensions Act required pension funds to take into account the latest forecasts of future increases in longevity to calculate liabilities, as well as the latest mortality tables.

This change caused Dutch pension funds' combined liabilities to increase by 5-6 percentage points, according to the IMF, which added that an update of future longevity assumptions increased liabilities by another 7 percentage points.

The IMF also praised other elements of the Pensions Agreement, such as its mark-to-market approach to assets and liabilities, and the termination of automatic contribution rises and unconditional nominal commitments.

"It is expected that these reforms will result in a pensions system that is more robust to shocks in financial markets and longevity," the IMF said.