Dutch pension funds should split their portfolios into two separate segments and abandon the notion of intergenerational risk-sharing, Keith Ambachtsheer has argued.
The director of the Rotman International Centre for Pension Management told IPE the risk-sharing element of the Dutch system was problematic, as it would always end with “the people with the power deciding things in their own interest”.
He echoed previous comments that the current system was akin to US Nobel laureate John Nash’s game theory.
“You can’t enforce [risk-sharing] unless you have a very strong governmental-type oversight that’s multi-generational, which is a pretty tough assumption,” he said.
“Where the Dutch need to go is – rather than have a collective thing – simply divide their asset pool into a compounding component and a payment-certainty component,” the Toronto-based academic continued, noting that the two asset pools should not be mixed, as is currently the case in the Dutch system.
He said he would keep “hammering away” at the idea until the Dutch “finally get it”.
Ambachtsheer has previously expressed concern that a new concept of solidarity, whereby money is taken from pensions in payment, is changing the Dutch approach to pensions saving.
Speaking at an event organised by the UK’s National Association of Pension Funds last year, he referenced Nash’s theory.
“If you want a win-win game between various parties, you have to figure out how to keep it win-win,” he said. “If there’s a chance the game becomes win-lose, it will. And then it breaks down.”
He has also been critical of previous proposals to revise the Dutch financial assessment framework (FTK) by allowing for a ‘nominal’ and a ‘real’ system of pension payments, deeming it flawed.
For more on the FTK, including alternative proposals, see the March issue of IPE