Opponents of the new Dutch Pension Act, which have a narrow majority in the new Dutch parliament after the elections of 22 November, want pension funds to continue their preparations for the transition to defined contribution (DC).
At the same time, however, they vowed to do everything in their power to “improve” the law.
On Wednesday, the new parliament debated pensions for the first time. As three out of the four parties that are currently in negotiations to form a new government want to make significant changes to the law (New Social Contract, NSC) or prefer to throw the reform out of the window altogether (Freedom Party PVV and Farmers’ Party BBB), the debate had been anticipated with some degree of nervousness by the pension sector.
On Tuesday, the country’s largest pension administrator, APG ,gave an interview to financial daily Het Financieele Dagblad, arguing that the idea of NSC to organise a member referendum about the conversion of defined benefit (DB) accruals to DC would lead to severe delays, higher costs and lower pensions.
At the start of the debate, member of parliament (MP) Bart van Kent of the far-left Socialist Party suggested pension funds should stop their preparations for the DC transition “because of the changed political reality” after the November elections.
Van Kent, however, failed to gain support for his idea among other parties sceptical of the pension reform.
“There is a new law now, and people have to act according to this law, even though we still think it should be reversed,” said BBB MP Henk Vermeer.
MP Edgar Mulder of the far-right PVV, now the largest force in parliament with 37 seats, also refused to heed Van Kent’s call. “The reality is that there is a law now, though we still don’t want this law,” he said.
“Every suggestion to make this very bad law better will be discussed positively by us,” Mulder added, alluding to the coalition negotiations the three parties critical of the pension law are currently conducting with VVD, the party of outgoing prime minister Mark Rutte that is a staunch supporter of the current law.
The option to organise a referendum to give members a say about whether or not to transition DB accruals to the new DC system or grandfathering them is one of such changes that are likely to be discussed during coalition negotiations.
“The least you can do is to give members a say. I call on the minister to embrace the option of a referendum,” Mulder said.
At the end of the debate, the former actuary turned MP Agnes Joseph tabled a motion urging pensions minister Carola Schouten to investigate options to grandfather accruals and only apply the new DC system for new accruals.
“Converting DB accruals to DC is not necessary at all,” Joseph argued. “Other countries have also changed their pension systems (such as the UK and Denmark), but have always left existing benefits untouched,” she said.
Joseph told IPE’s sister publication Pensioen Pro after the debate that she wants a member referendum to be mandatory if a pension fund had the intention to convert DB accruals to DC.
Pensions minister Schouten, however, refused outright to carry out Joseph’s motion if it were to be adopted at a vote scheduled for next Tuesday. According to Schouten, Joseph’s request to separate existing benefits from new accruals would be “a fundamental change” in the law that would bring the reform “back to square one.”
She added: “I’m not going to take this responsibility.”
Meanwhile, the VVD, the only supporter of the pension law in its current form that is taking part in coalition negotiations, only has “limited enthusiasm” for the amendments to the pension law that were suggested, including a referendum.
VVD MP Thierry Aartsen said: “A referendum may sound sympathetic, but that’s deceptive. Pensioners or people close to retirement tend to be much more involved than others with pensions, and will be more likely to vote.”
This could lead to skewed and unbalanced outcomes, he added.
At the same time, however, Aartsen stopped short of ruling out any changes to the pension law. “On the negotiating table, everything is up for discussion. We have no red lines,” he said.
So, while pension funds got a green light from parliament to continue implementing the pension law, they are not out of the woods yet. Uncertainty about the law’s fate will continue for the time being.
But the clock is ticking in favour of the supporters of the DC transition: the first pension funds are scheduled to make the transition to DC by 1 January 2025, marking a point of no return for the sector.