NETHERLANDS - The government should increase the competitiveness of the Dutch pension sector by removing fiscal barriers to scheme mergers, instead of abolishing mandatory participation, the Association of Industry-wide Pension Funds (VB) has suggested.
Calls from VB follow comments from Stef Blok, MP for the liberal party VVD, claiming the international marketing of the Netherlands as a pensions centre has so far failed to take off because the present mandatory participation leads to complacency among pension funds and providers.
VB stated in a response to the MP's - who argued it might be possible increase the sector's market orientation by ending mandatory pensions participation - compeition might be better solved it were to "stop charging VAT on asset management, and prevent arbitrage on pension fund supervision".
Blok had pleaded in favour of making pensions contributions mandatory only on workers' contributions, the implementation of which should be tendered for by pension funds.
In the MP's opinion, the removal of mandatory participation of companies in industry-wide schemes will allow them to change to providers offering tailor-made solutions.
Blok also suggested the mandatory participation of workers should be limited to an income of €45,000, and allow them to insure anything on top of that on the free market.
VB is critical of Blok's proposal - suggesting the removal of mandatory participation will lead to better returns - as officials argue it is not based on any study.
"Research has shown that pension funds can carry out schemes much more cheaply than insurers, and that larger schemes incur less costs," said VB.
"Freedom of choice on pension implementation will shrink the size of the collective market and with this the benefits of shared risks. Most participants in a collective scheme will prefer larger benefits or a lower contribution to their own scheme," it added.
VB also disagrees with Blok's suggestion to limit the income liable to mandatory participation too.
"Experience in the UK and the US has made clear that, without sufficient guidance, workers do not save enough or make wrong investment decisions," it said.
In VB's view, the exportable Dutch pensions expertise is mainly with service providers, such as Cordares and MN Services, as well as within the future arrival of services in the market from major pension schemes ABP and PGGM.
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