Dutch government pushes back planned changes to DC annuity laws
Legal proposals to allow Dutch pensioners in defined contribution (DC) schemes to postpone the purchase of an annuity will be pushed back, according to Jetta Klijnsma, state secretary for the Social Affairs Ministry.
Currently, all DC pots in the Netherlands must be converted entirely into an annuity as the member reaches the state pension age.
The government had been expected to allow savings to be invested continually until a later date.
But Klijnsma, in a letter to Parliament, said the government needed more time to work out the responsibilities of pensions providers towards DC members who opted for such arrangements.
Both Parliament and the pensions industry urged the state secretary to introduce legislation as soon as possible, as low interest rates are leading to low pension incomes for retiring workers as they convert to an annuity.
But Klijnsma said adjusting the framework for DC plans raised complicated questions about the implementation of some legal aspects, including providers’ scope of duty towards members, and who would be responsible for investments.
She added that standardisation would be needed to prevent annual volatility in pension benefits, and that the government would focus on elaborating DC contracts that allowed for variable benefits, in order to limit complexity and speed up implementation.
However, she did not specify what this meant for alternatives with or without collective risk sharing for pensioners.
Klijnsma said the planned introduction of new legislation would be postponed by six months to 1 July 2016, and that another round of consultation was a possibility.
The UK recently removed restrictions on DC savers, scrapping the need to force an annuity purchase entirely.
Prior to 6 April 2015, UK DC savers had to purchase an annuity if savings fell between £18,000 (€24,000) and £310,000, with the average size around £25,000.
However, unlike the Netherlands, there was no requirement to purchase an annuity physically until savers reached 85 years of age, allowing them to remain invested until this point.
Since April, UK savers have been able to access their DC savings in a variety of ways including drawing down cash or investing in income drawdown products.