The Dutch pension system is based on a three pillar system. The first pillar consists of a pay-as-you-go state pension (AOW) providing a flat rate benefit for all residents. The amount for a couple is 100% of the legal minimum wage (singles: 70%). Most workers are also entitled to a job-related funded supplementary pension (the second pillar), usually according to the final salary-system, but more and more on the basis of average pay. These can be organised on industry-wide or on company level. The third pillar relates to all other voluntary personal arrangements.

Quality of occupational pensions
In 2000 the Social Economic Council published an extensive overview of the quality of occupational pensions in the Netherlands. Almost all employees (91%) have a pension plan in which they can reach a pension of 60% of the latest gross salary or more. For 2% of the 9% of employees not participating in a pension plan as part of the labour agreement this is due to the fact that the employer does not have a pension provision at all (usually start-ups or small enterprises). However, the total coverage of Dutch pension provision for employees since 1987 is still increasing. Besides, it appears that almost all participants, including the pensioners, have index-linked pensions. Most plans index-link to the development of wages or prices.

Recent developments
q Pension covenant. In 1997, social partners and the Dutch government agreed to further modernise supplementary pension plans whilst keeping costs under control. A number of indicators (contribution-free allowances, accrual percentages, types of plan, the existence or otherwise of collective surviving dependants’ pensions, and the possibility of exchanging a surviving dependants’ pension for a higher or earlier retirement pension) have been used to evaluate to what extent objectives have been met. The final evaluation was completed in summer 2001. Almost all goals of the pension covenant have been reached. Therefore government will not exclude final pay schemes from the right of tax deductibility on the contributions.
q Equal treatment of men and women. With the passage of the Act of 21 December 2000, laying down the right to opt for a retirement pension instead of a surviving dependant’s pension equal treatment of men and women, the Netherlands took another step towards individualising income provisions. During parliamentary discussions on the act representatives insisted on taking equal rights for men and women on board. Amendments were agreed, stating that differences in life expectancy should no longer lead to differences in pension payments between men and women, regardless of whether the plan is based on defined benefits or defined contributions. For defined benefit plans the act will apply from 1 January 2002, for defined contribution plans from 2005.
q Obligatory participation in an industry-wide scheme. On 1 January 2001 a new act on obligatory participation in an industry-wide scheme came into effect. The principle of compulsory participation, on request of social partners and decided by the Minister of Social Affairs, has not been changed. The Dutch government, as the European Court of Justice in the Albany/ Brentjes cases in 1999, states that compulsory membership can serve as a point of departure for qualitatively sound and, because of the inherent solidarity, relatively advantageous pension schemes for everybody. However, compulsory membership will be bound to stricter rules. It is no longer allowed to use name or logo of an insurance company which is linked by the compulsory industry-wide pension fund. The compulsory industry-wide pension funds are also limited in their information provision to members of the fund (only about the pension fund itself, not about additional voluntary products provided by linked (and not linked) insurance companies. Finally, the compulsory industry-wide pension fund must use an average premium which is the same for all members, regardless of age, sex or health. By amendment of parliament, voluntary pension products provided by compulsory pension funds still can be compulsory for employers.
q New pension act. The government has the intention of modernising the Pension and Saving Funds Act (PSW). One of the thoughts announced by the government is to make the scope of a pension plan universal. This means that it will be forbidden to exclude ‘flex workers’, new employees or temporarily workers from pension plans. This all-embracing scope is not absolute. Firstly, employees with a very short contract (holiday jobs) do not have to be accepted into the plan. Secondly, the government is thinking of maximising a threshold age or instance, 18, 21 or 23 years. In May 2001 the Social-Economic Council gave its opinion on the governments intentions. A draft legislative proposal for the parliament is expected in the autumn of 2001.
q New actuarial principles. The Pension and Insurance Supervisory Board (PVK) has started a discussion about whether a fixed basic interest rate and the policy around buffers for pension funds should be maintained as it is, or replaced by a supervision more based on risk analysis. In the proposed revision the reservation for pension liabilities is tested by an internal model of the pension fund. This model should be based on a system of risk management and measures the total risk of liabilities, investments and the relation between these two. Every model needs approval of the PVK and as an alternative a more robust and simplified model is provided for. In that way the PVK wants to stimulate pension funds to use sophisticated risk management models and additional tools such as ALM to examine possible risks they run. In 2000 VB and OPF published a study on these subjects, ‘Keeping on course’, which has been distributed among EFRP members and other interested parties in Europe.
q Co-decision pensioners. In 1998 social partners and old people’s organisations decided in a covenant to stimulate the representation of pensioners in schemes.