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IPE special report May 2018

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Politicians' exemption from pension rights cuts draws fire

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  • Politicians' exemption from pension rights cuts draws fire

NETHERLANDS - Dutch MPs and other political officials such as ministers and local aldermen have been deemed legally exempt from any discount of pension rights.

Although their pension arrangements follow the rules of the civil service scheme ABP, any discount decision will only apply to 'ordinary' participants.

Pension claims from MPs can only be adjusted through a change of the General Pensions Act for Political Officials (APPA), which requires a two-thirds majority in parliament.

But there have been calls for changes to the APPA. According to Michael Visser, researcher and lecturer at the Competence Centre for Pension Research of Tilburg University, the pension arrangements for politicians are "prehistoric".

One of the problems is that politicians' pensions are paid directly from the budget of their employer, which could be the central government, a county, a local council or a water board (waterschap). Capital funding is not mandatory.

As a result, the financial risks are also for the employer. When many political officials retire, this could cause problems, Visser said.

He cited as an example the 2011 annual report for the northern county Drenthe, where the accountant said the county's provision for future pension liabilities was insufficient.

His objection corresponds with the findings of a committee chaired by Hans Dijkstal - a former home affairs minister - in 2006, which concluded that the pensions system for politicians was outdated.

"The update of the APPA requires considerable adjustments in the set-up of old age and surviving relatives pensions," the Dijkstal committee said, adding that the de-centralised pensions provision was "risky and inefficient".

In the opinion of the committee, the pensions provision for politicians should be outsourced to a pension fund, in particular to decrease the financial risks.

"Currently," it said, "a request for value transfer from APPA participants leads to a considerable and unpredictable burden for the employer's budget. If a pension fund takes over the financing, the current open-ended character of value transfer will disappear."

The Dijkstal committee suggested to link up with the civil service scheme ABP. Its rules were the example for the APPA arrangements.

Since 2006, only minor changes have been made in the APPA. Critics say the legislation is still complicated, and its implementation has not changed.
 
In its 2010 annual report, the home affairs department said: "The drafting of the cabinet's view on the committee's recommendations has been postponed because of the funding shortfall at ABP."

That said, in July 2012, parliament ruled that the maximum half-pay period for political officials in the APPA would be linked to the maximum term for unemployment benefits.

Visser said the bill would further the harmonisation of labour conditions for political officials, as well as answer calls by the public that they also contribute to cost-cutting measures.

He suggested that it would have been appropriate if MPs had proposed to add a discount clause to the APPA at the same time.

A spokesman for the home affairs department, however, said it was still too early to discuss rights cuts.

"Because the current APPA lacks a discount clause, both the cabinet and parliament must take decisions on the issue," he said.

"ABP is to decide on possible cuts in early 2013 following the financial situation at year-end. That is the very moment to consider whether a discount will affect politicians."

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