The first thing you notice when you meet Dutch Christian-Democrat MP Pieter Omtzigt, is his youth. Walking through the eastern Dutch town of Hengelo, Omtzigt looks like your stereotypical – thus tall - Dutchman. But at the age of 30, he is an MP, holds a PhD and has managed to stir up controversy in the country’s sometimes staid pensions industry. Time for a chat with IPE.
Even in the quiet early days of 2005, Omtzigt is a busy man, fielding various calls on his mobile, while simultaneously trying to reach the sports minister in an attempt to push through a subsidy for the local athletics stadium.
Omtzigt joined the CDA party in the lower house of the Dutch parliament in June 2003. He is spokesman on pensions, the health care system and state owned companies for the biggest coalition party.
Why pensions? “I have been studying pensions for years,” he explains. The MP studied econometrics in Exeter (UK), Rome and Florence and received his PhD from the European University Institute in Florence in 2003. He still spends one day a week at the University of Amsterdam as a postdoctoral fellow at the Quantative Economics department. “I think pensions are one of the great challenges of our time. How do you make sure everyone will be able to enjoy a good pension, in light of changing demographics and rapidly ageing populations? Which choices do we have to make?”
Unlike most of his fellow MPs, who have risen through the ranks of the party system to be awarded with a seat in parliament, Omtzigt became an MP after having spent 10 years of his life abroad. Between the ages of 18 and 28, he lived in the UK and later in Italy. Although Omtzigt keeps an apartment in The Hague, he has made Hengelo, a small town in the east, his home.
It must be quite a contrast to Florence? “Yeah, you could say that,” Omtzigt, who is fluent in Italian, grins. “I have to admit, I do miss Florence sometimes.”
Because of his years abroad, Omtzigt never had the chance to become part of Holland’s much-maligned ‘old boys’ network’. As a result, his approach to politics and the pensions industry is refreshing.
Omtzigt managed to ruffle the feathers of the powers that be at the Dutch Central Bank when the proposed merger between DNB and the pensions watchdog PVK was temporarily blocked after he found out (by reading DNB’s annual report) the size of the central bankers’ remuneration packages.
“The amount of money they were paying themselves was just outrageous,” he said at the time. After being put under pressure by the CDA party, finance minister Gerrit Zalm was forced to reveal that at least one DNB board member was getting a salary and pension package of e600,000 a year, which was e200,000 more than Zalm had said previously. Collectively, the board members obtained an extra e1.5m in pre-pension payments.
“We are in favour of the merger but we were very unpleasantly surprised when we discovered just how generous the pension package of the pension supervisory board was, especially after they forced many others to take a smaller pension,” Omtzigt told IPE at the time.
“In addition, they had a pre-pension age of 60, while they had insisted that everybody works until 65. And last year the pension payments of the central bank amounted to 80% of wages, which we consider a world record.”
MPs were also critical of the fact that DNB is still guaranteeing full indexation of its pension plan participants, while at the same asking other pension funds to cut costs.
Omtzigt called the arrangements “luxurious”, further criticising the PVK for not wanting to change its current final salary scheme to a career-average with indexation. His actions infuriated the bankers, culminating in DNB president Nout Wellink calling Omtzigt’s comments “tendentious and grievous”.
In spite of this, Omtzigt and his fellow CDA MPs got what they wanted. After a long debate, the government agreed to set up a special commission in charge of assessing the central bank governor’s salaries. Their salaries are currently in the e312,000-e390,000 range, based on commercial bank pay levels. In comparison, the Dutch prime minister earns e123,000 a year. In future, ministers will have to approve salaries above ministerial level on an individual basis.
In addition, the commission will also look into pension rights while the government promised more transparency in disclosing the governor’s pay checks. And finally, Zalm agreed staff at PVK would move from a final salary pension to an average-salary pension.
“A lot can be said about the integrity of the Dutch pensions watchdog,” says Omtzigt. “Bank governors awarding themselves enormous pensions; it is just beyond belief. But I am satisfied with the outcome of the debate.”
Omtzigt is now campaigning for the survivor pension. He says he is “increasingly surprised” by the choices subsequent cabinets have made in this area. The Netherlands has moved from a country with a social security system based on one family member earning all the money, to a society of ‘tweeverdieners’, or partners who both make a living. As a result, survivor pensions have been stripped down to the bare essentials by a number of pension funds.
“By cutting down survivor pensions, you are creating a large group of poor elderly people, mainly women,” he argues. Although most women nowadays do have a job, almost half of them work part-time and they still earn less than men. This has huge consequences for their pension pots. Because women live longer then men, a good survivor pension is crucial, he reasons.
He says he is fighting an uphill battle to get the message through. “We are talking about a group of perhaps one million people who could potentially be affected by this. But it is not a homogenous group, and it is hard to raise people’s awareness, particularly if their partners are still alive.
“Pensions are a difficult subject for most people,” Omtzigt admits. “It is simply too abstract. It’s strange, people are willing to go to a different supermarket if the milk turns out to be 10 cents cheaper, but very few realise what grave consequences the wrong choice of pensions can have later on in life.”
With a new pensions law in the making, Omtzigt says he would like to see pension funds improve their communications with their participants, and inform them in a clear and comparable manner about what rights they do and do not have (such as a survivor pension).
He has, however, had some luck in persuading a number of pension funds, like Europe’s biggest fund ABP, to better communicate changes in survivor pensions to their participants.
In Italy, Omtzigt saw first-hand what happens if demographics are turned upside down because of rapid population ageing and changes in socio-economic patterns. Italy now has the lowest birth rate in Europe, with a typical family having four grandparents, two parents and only one child.
Omtzigt says the current Dutch government (which is led by his own CDA party) is on the “right track” when it comes to tackling these developments. “Unlike Italy (where pensions could not be paid for a time because the government had run out of money) social and economic changes tend to take place at a gradual pace in the Netherlands. This government is tackling the pension issues head-on and is taking a long-term view.”
The government’s approach to pensions requires a change in thinking in the Dutch themselves. The state no longer provides for everything. The new lifestyle savings scheme (introduced by CDA Social Affairs Secretary De Geus) is a good example of that. It is essentially an individual piggy bank and gives people the choice to do with it what they want. It can be used to save up to care for a family member, retire early or take a year out to study. “It is much more down to the individual’s own responsibility, so the government can continue to focus on those groups who really do need our help,” Omtzigt says.