Uproar as Dutch pension plans leaked
NETHERLANDS – There is uproar over a leak of the forthcoming budget which has revealed that the government is looking at possibly raising the retirement age to 67.
In a leaked version of the Dutch government budget proposals, the Miljoenen Nota, which was to be released on September 21, the government has indicated that it is assessing the possibility of increasing the current pension age of 65 to 66 in 2005 or even 67 in 2015.
Such proposals would be certain to put all social partners, including pension funds, on a war footing with the government.
According to the budget report, as reported by Dutch news station RTL5 - and today published in all newspapers - the Ministry of Finance and the Ministry of Social Affairs have been assessing the financial effects of the proposal.
The issue has come to light as the Board of Participants of eight large Dutch pension funds – including names such as PME, ABP, PGGM and Bouwnijverheid – have written an open letter to Parliament, asking the government to consider a more flexible implementation of the proposed pre-pension arrangements.
The proposals are not really new. Minister of Economic Affairs Laurens Jan Brinkhorst has been hinting several times before the recess of Parliament, that this possibility should be considered. In the budget text, as presented by RTL5, the government proposals already have been assessed by the CPB, the Netherlands Bureau for Economic Policy Analysis.
This assessment has been based on the perceived effects of an increased pension age of 66 in 2005 and 67 in 2015.
According to statements made by officials of the Ministry of Finance, a higher pension age will lead to increased employment levels, lower pension contributions and lower taxes.
According to the Miljoenen Nota 2005, pensioners also will feel the positive effects, largely based on lower taxes and higher indexation by pension funds.
“The new proposals as stated in the Miljoen Nota are out of order,” said Bram van Els of metal fund PME. “The introduction of a later pension date, 66 or 67, will not only be putting increased pressure on our members, but also is a sign that the government is not yet able to construct a functional strategy.
“The already forced introduction of 65 is already unfeasible, as most of our members are working in difficult circumstances.
“The new pension age will not only be unworkable for most pension funds, already under increased work pressure to cope with new rules and regulations, but also will result in more people going to be ill during their last years of work.”
Meanwhile, the extent of the well-documented distress among Dutch pension funds at the growing legislative and regulatory pressures has been quantified by asset manager SEI.
Senior executives from Dutch companies and pension schemes contacted during June and July reported that the demands of corporate governance, the IFRS/IAS19 international reporting requirements and guidelines from regulator PVK are leading to more bureaucracy, increased emphasis on risk control and higher costs for pension funds.
“The changes have shown some unfavourable and unintended consequences for Dutch pension funds,” noted SEI managing director of the Nordic and Benelux regions Bart Heenk. “These consequences include reduced benefits for employees and increased costs for them and their employers.”
The research found that more than three-quarters of respondents believed that decision-making was becoming more bureaucratic and 61% expected that the situation would get worse.