“Allowing restitution within the Future Pensions Act can resolve the biggest bottlenecks”
What is the focus of the paper?
This paper analyzes the Dutch partner’s pension under the Future Pensions Act (Wtp) and compares with an
alternative based on restitution and quantifies the main effects.
What are the key findings?
The paper shows that the partner’s pension under the Wtp can depend strongly on the exact time of death, labor market status (employed or not) and the investment returns achieved.
A possible arrangement with restitution (where the accrued pension capital counts toward the partner’s pension also in the event of death before the retirement date) largely eliminates the bottlenecks.
Restitution requires only limited additional costs and virtually eliminates the redistribution from young to old under a uniform partner pension premium.
These effects dominate in the longer run. Until transition effects have faded out, there will usually be double
coverage of the risk to pass away before the retirement date.
What are the implications?
- Allowing restitution within the Wtp can resolve the biggest bottlenecks. The behavior assumed in the Wtp where former employees would adequately insure themselves without restitution is not realistic, according to the academic literature.
- Basing partner’s pension benefits after the retirement date on accrued partner’s pension rights, also in the event of death before the retirement date, reduces sensitivity to timing and aligns better with the old-age pension.
- Replacing the retirement date with the state pension age (AOW age) as the transition moment can limit strategic behavior, but it leaves sensitivity to the timing of death in place.