Defined contribution (DC) pension arrangements with collective risk-sharing would be the best means of creating a sustainable pensions system in the Netherlands, according to healthcare scheme PFZW.
During a presentation of its views on Dutch pensions – as part of the ongoing nationwide debate on the system’s future – the €162bn scheme cited in particular the transparency, simplicity and clarity this model provided on individual pension rights.
“If the [government] also allowed for collective risk-sharing,” it added, “this alternative would offer the best of two worlds.”
The Social and Economic Council (SER), with the support of the Dutch Pensions Federation and insurance industry group VvV, also recently sang the praises of contribution arrangements combined with collective risk-sharing.
PFZW said it had also considered the option of a defined benefit (DB) plan with a pensions target in real terms, as well as a DB scheme with ‘degressive’ accrual – in which the contribution decreases in-line with age – combined with a tailor-made approach for age groups.
In the Netherlands, the current ‘average-premium’ approach has come increasingly under fire, being seen by many as inherently unfair to younger generations.
PFZW said any DC option must include the sharing of investment risk between generations.
As a consequence, collective buffers will need to be maintain together with individual pension accounts, according to Albert Vink and Florent Vlak, board members at PFZW.
The pension fund also called for the default participation of the self-employed in second-pillar pension schemes, and said it wanted to further investigate the possibility of “freedom of choice” – using part of accrued pension assets at the date of retirement for a specific target, for example.
PFZW, however, said it did not favour a voluntarily reduced accrual, “as people cannot envision the effect of a lower accrual over the long term”.
It also rejected the possibility of paying off a mortgage with pensions assets, arguing that this could hurt returns, and that the amounts that could be taken out would be too small.
Jetta Klijnsma, state secretary at the Social Affairs Ministry, is expected to outline her conclusions from the nationwide pensions debate later this spring.