Ahead of the resumption of the plenary debate about the new Dutch pension law on Thursday, the five largest pension schemes in the Netherlands have sent a letter to Dutch parliament to explain why the current pension system “does not work anymore” and change is needed.
ABP, PFZW, PMT, Bpf Bouw and PME, which manage some €910bn in assets between them, said in their letter that the changes to the pension system that are proposed in the new Dutch pension law are “a solution to all the problems” of the current defined benefit (DB) system.
According to the pension funds, the current system is untenable in the long term because of the Netherlands’ ageing population.
“Offering guaranteed pensions is no longer feasible under the current financial assessment framework, regardless of the level of the actuarial interest rate. Because of structural demographic changes, increasing contributions is no longer effective to weather shocks.”
The pension funds decided to write their letter after “negative media reports about the new pension system”.
Last week, the country’s largest De Telegraaf ran a front page article citing a study by actuary Henk Bets, which had featured earlier on IPE. Bets had concluded pension benefits would have come down by 3.5% in 2022 if the new pension system already had been in force this year.
“The media reports suggested the new pension system would be disadvantageous for pensioners. We want to object to this claim together with other pension funds. That’s why we have written a joint letter to parliament,” a spokesperson for PMT said.
In their letter, the five schemes noted that pension funds will be more likely to index pensions in the future as they no longer need to hold buffers under a defined contribution (DC) system.
“A pension fund with a funding ratio of 120% can only increase pensions by about 25% to 30% of the inflation level under the current system. In the new system much more would be possible.”
The five funds also believe moving DB accruals to the new DC system is “crucial”.
They said: “Grandfathering existing rights would mean the collective pension system would be fractured into two parts. This would lead to increased costs which would last for decades, leading to lower pensions.”
Besides, members would get two types of pensions, which would lead to “contradictory communication”.
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