After five years of intense negotiations and acrimonious disputes, the Dutch have finally settled on a new financial framework (FTK), expected to take effect, at least in part, as of January 2015.
But many now wonder whether Godot, having finally arrived, was really worth the wait. After all the brouhaha, the new framework is a bit of an anti-climax. Gone are the grand ambitions to redesign the pensions system, gone the bold plans to introduce conditional schemes delivering real, inflation-linked pensions.
Instead of sweeping change, the proposed FTK merely offers minor patches and repairs. Under the new regime pension funds get a bit more time to spread the pain of financial setbacks, they will be a bit less dependent on volatile market rates, and their capital buffers are set a bit higher. In other words, with the new FTK everything pretty much stays as it was.
And that changes everything.
Because the quest for pension reform, kick-started in 2009, was inspired by a need to future proof a system. That need has not gone away. On the contrary, pension funds have since been forced cut rights and raise contribution levels. Consumer confidence in pensions dropped from 85% in 2008 to a low of 55% in 2012 – well below banks and insurers.
Although news that draft legislation for a new FTK has finally been submitted to parliament was met with relief by the industry – after five long years anything is better than nothing – there is wide-spread disappointment that politicians, social partners and other stakeholders, having lurched from one ambitious proposal to the next, in the end have failed to address the issues facing the sector.
Truly fundamental reforms it seems, must wait for a ‘national pensions discussion’ organised by the government. This new round of reform talks, scheduled to kick off next year, is to involve an even broader set of stakeholders – and is thus likely to take even more time.
The prospect of fresh reform talks is met with a certain amount of reform-weariness in the pensions sector. Many players cannot afford to wait for the outcome of yet another new round of discussions. As employers are looking to wind up their DB schemes and are increasingly switching to alternatives such as individual DC, reality is rapidly catching up with the slow and arduous process of change-by-consensus.
The FTK has failed to deliver much-needed reforms, but as the seafaring Dutch have long known: while a captain may refuse to change course, in the end ‘the shore will turn the ship’.