NETHERLANDS - The Dutch government must actively approach the pensions crisis by raising the official retirement age from 65 to 67, the Council of Economic Advisers (REA) says.

According to the REA, an independent adviser body to parliament, the government must face the ‘demographic reality' because over the last 10 years alone, conditions have changed and life expectancy is predicted to rise by 1-1.5 years by 2050.

Earlier this year, the new cabinet - a coalition of Christian democrats CDA, labour party PvdA and ultra-conservative political party Christen Unie - decided against raising the official retirement age.

Instead, it chose to introduce an additional tax from 2011 on pensioners who have pensions savings beyond the State pension system - such as second or third pillar pensions - where the additional savings are worth more than €18,000.

In the opinion of the REA, the retirement age of 65 should be gradually raised by a month a year during the next 24 years.

In addition, the model for the pension fund governance - currently allowing equal representation of workers and employers - ought to be re-examined because of further up-scaling of pensions use, European pensions legislation and an increasing shift of risk to participants, the REA said.

For defined contribution schemes in particular, the participants must have a say in the destination of the ‘floating surplus', the advisory body stated.

"Government should help modernise pension fund governance by allowing schemes to experiment with alternative models, such as adding participants to boards, or by replacing workers' representatives with participants," it suggested.

Pensions funds should also be allowed to consider changing their governance model from a foundation to a cooperative or society, so participants become owners of the assets and appoint the board, the REA added.

As a third possible model, it suggested pension funds could transform from foundations into mutual insurers.

According to the REA, the government must also support further up-scaling in the national pensions sector and encourage the creation of new organisations, such as general pension institutions (APIs), with more operative freedom.

The think-tank also stated the mandatory participation of companies in an industry-wide pension fund is less important than the mandatory participation of individual workers in company schemes.

Such mandatory participation has been subject of discussion in the context of a rapidly-changing economic structure, and increasing competition in the European pension market.

Social Affairs Minister Piet Hein Donner recently indicated he wants to stick with mandatory participation for the foreseeable future.