Corien Wortmann-Kool, chair of the €440bn Dutch civil service scheme ABP, said she was worried that not all important issues would have been solved, when the concept of the fleshed out pensions agreement is to be presented in the coming weeks.
In an interview with Dutch pensions publication Pensioen Pro, she said she wasn’t aware of any satisfactory proposals for merging existing pension rights with pensions to be accrued under new arrangements.
She added that she had also failed to spot recommendations for more generous return assumptions that pension funds could apply under the planned defined contribution (DC) contract, which is to replace defined benefit (DB) plans.
Social affairs’ minister Wouter Koolmees had promised to send the draft of a new pensions system to parliament before the summer.
Wortmann highlighted that mandatory merging of pension rights is “crucial for ABP as an industry-wide pension fund”.
“Without compulsary joining, the risk is that our sectors drag their heels, which will delay reform,” she argued.
“And we don’t want a pension fund managing existing pension rights alongside a second one for accrual under the new rules.”
The chair said the issue must be solved in order to improve conditions for ABP’s participants and pensioners.
In her opinion, new DC arrangements – without pension claims, but with merely targets – also require solid assumptions for future returns. “This must be translated into different discount rules.”
“It is important that, in times of economic tailwind, results can benefit participants rather than be added to a pension fund’s financial buffers,” Wortmann noted.
However, she also acknowledged that participants must equally accept the impact of bad financial conditions on their pensions as well.
ABP’s chair reiterated that it is too early to make firm predictions about any rights cuts next year because of current “unknowns”, but said that there is a “fair chance” that pensions need to be reduced.
That said, she noted that the social partners and the minister could take the planned new pensions contract into account when deciding about a pensions reduction in 2021.
Wortmann further highlighted the urgency of a new pensions system. “Given the low interest rates, the elaboration of the pensions accord must succeed,” she said.
She said that the introduction of an entire new system as a “big bang” in 2027 – as reportedly being discussed in the steering group for pensions reform – would be a “very long shot”.
“Although the introduction requires a lot of preparation, we hope that we can adopt the new rules sooner,” she said.
The chair also said ABP had given up hope that it can ever make up for inflation compensation in arrears. The pension fund hasn’t been able to grant indexation in the past 10 years.