When solidarity fails to deliver
The difference between Dutch and French or Spanish concepts of solidarity were highlighted at the recent annual meeting of VB, the Association of Industry-wide Pension Funds, held in Baarn.
VB chairman Ton Wennekus said: “The concept of solidarity in France means no capitalisation and no funds, just pay-as-you-go, with the most extreme form of solidarity between generations.
“Most of the public in France and Spain do not like the form of capitalism where you give your money to insurance companies to deliver you’re your pension.” So it comes down to the young paying for the old, he said.
“This is understandable, but wrong in terms of the shrinking proportion of young ages in the population.” On the other hand the Dutch system was ‘generation proof’, he claimed.
But Wennekus was aware of the major issues when introducing a funded system alongside a pay-as-you-go system. “When you do this you are doubling the cost on one generation.”
He added that he could understand the difficult problems this posed for French politicians. “This is not an easy political decision to take.” The Dutch system may be the best in the world, but how many “buyers” are there for it, he asked. “We certainly would like to export it.”
There had to be concerns about the pension of French people under this system. “Inevitably there would be a sharp reduction in benefits in 10 to 15 years time, as these PAYG systems are simply unaffordable any longer.”
The French premier may have retained his position at the recent elections, but he would be powerless to solve the pension issue since over half the French public are against it. “The same attitudes apply in Spain and Italy.”
Looking at the domestic scene, Wennekus, who represents the employee side on the VB, with 85 pension schemes members, said of the past turbulent years: “The main thing is that we have survived.”
Even after the sharpest decline in markets since 1929, the Dutch funds still had an overall surplus of 110% of funds. “Stockmarkets are a problem for us, but are not decisive.”
One of the main issues facing pensions nationally was that the Dutch did not know how well they are taken care of. “They trust us without knowing why.”
This is an area that the VB was tackling through more communication involving a major information campaign. “We want to
introduce a higher state of consciousness about the real state of pensions.”
Wennekus also referred to the need for pension funds to be more transparent and to pay more attention to governance matters. “It is our members’ money and our obligation is to be transparent.”
The governance issues facing VB members are being addressed, he said. “In the next few months we will produce a code of conduct for our members.”
Some of the social implications of an ageing population were spelt out by Jenny Gierveld, who is a professor at the Free University in Amsterdam, as well as with the Dutch Institute for Interdisciplinary Demographic Studies.
Looking back, she pointed out that at one point the fear was that there were too many children not too few. This was in the past-war period, with the arrival of the baby-boom. Then people were talking about the population hitting over 20m if the trend continued.
She disagreed with those who reckoned health costs rose significantly because of ageing. Only a limited amount of this increase
was due to reasons of ageing, she maintained.
Also on the ageing theme, Hugo Keuzenkamp of Zorg Delta Lloyd pointed to a number of paradoxes about labour participation. There are signs that the participation rates of the older sections of the community in the labour market was rising. In addition, women’s rates needed to increase further, as did that of foreigners.
He showed some correlations between women who worked and fertility- those who do not work were more fertile and had more children. Among higher incomes there was also lower fertility.
There was scope, he believed, for action by the politicians to encourage people to have children, in particular by having more by way of family allowances related to numbers of children. That could have an impact on fertility rates.
The availability of childcare at the early ages was also something that could have a positive effect on
Keuzenkamp floated the idea of a German professor who suggested that pay-as-you-go pensions were only paid to those with children. However, his audience did not seem to be convinced.