Actuary turned politician Agnes Joseph, who has been a member of Parliament (MP) for the new political party NSC in the Netherlands since November 2023, has finally come up with her long-awaited proposal for a mandatory ballot on the pension fund level on the conversion of defined benefit (DB) pensions to defined contribution (DC) capitals.
Joseph made public her proposal on Tuesday in the form of an amendment to a law that arranges the extension of the transition period to the new DC pension system beyond 31 December 2026.
This law is set to be discussed in Parliament later this month, and will now also include Joseph’s amendment, which she tabled together with her party leader Pieter Omtzigt, a long-time critic of the pension reform, and Henk Vermeer, an MP of government coalition partner BBB.
According to the amendment, pension funds will have to organise a ballot on the question of the conversion of DB accruals to DC capitals with all active and inactive members as well as pensioners eligible to vote.
At least four weeks before their planned transition date, pension funds should ask their members whether they want to convert their pensions to DC, according to Joseph’s proposal.
30% turnout requirement
Pensions will only be converted to DC if more than 50% of votes cast are in favour of this. If less than half of votes are in favour, all pensions will remain in DB. Crucially, this will also happen if turnout is lower than 30%.
This last condition is particularly important, as many pension funds are unlikely to meet the 30% turnout threshold. Especially for pension funds with a relatively large share of inactive members, the response rate to surveys tends to be well below 10%.
Joseph, however, believes that more people will cast their vote in this case. “It’s important that people can decide themselves if they are ready to accept a pension that may be a little higher than now, but is more volatile,” she told a radio show on Tuesday.
If pension funds don’t want to organise a referendum, they can offer their members an opt-out from the DC conversion, with their accruals staying in DC.
“Such an individual right of objection would have actually been our preference,” Joseph told the same radio programme.
Most pension funds are planning to transition to DC on either 1 January 2026 or 1 January 2027. According to Joseph, the three pension funds that have already moved to DC will be exempt from organising a voting.
Inoperable and unaffordable
Ger Jaarsma, the president of the Dutch Pensions Federation, has slammed Joseph’s referendum proposal. “With these proposed amendments, the Future Pension Act [the new pension law cementing the switch from DB to DC] will effectively be dismantled. Moreover, these plans are inoperable and unaffordable,” Jaarsma said in a statement published on Pensioenfederatie’s website.
He added Joseph’s plans imply that pension funds and social partners need to start from scratch again if her proposal is accepted. After all, pension funds have up until now been working under the assumption that all accruals will be moved to the DC system.
“If this proposal goes through, many years of work and investments will be undone and the reform will irrevocably be delayed. Eventually, this will be to the disadvantage of workers and pensioners,” said Jaarsma, who added that the proposal also risks the loss of several billions of EU money from the COVID Recovery Fund.
According to Joseph, the extra costs that will be the consequence of the proposal will have to be borne by “employers and pension funds,” she said in a comment on her amendment.
PVV
Joseph’s proposed amendment will, together with the one that arranges the extension of the transition period, be discussed on 29 January in Parliament. It’s not yet sure when Parliament will vote on it, but this is likely to happen as soon as February.
Joseph expects her amendment will pass with the support of another coalition partner, the far-right PVV which has always vehemently opposed the pension changes.
“I cannot imagine the PVV will not support this amendment,” she told the radio show. After passing the Second Chamber, the amended law will then move to the Senate where supporters of the switch to DC retain a majority.
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