“A mandatory pension system can reduce pension gaps, but requires careful design to ensure feasibility, public support, and fair market functioning.”
What does the report examine?
This paper examines how a mandatory pension system for all workers in the Netherlands could be implemented in practice. The motivation is that self-employed workers and part of employees accumulate insufficient pensions. The study analyzes different implementation models, assuming a legally required minimum contribution. It evaluates two main variants (a single standard provider versus choice among existing providers) and alternatives such as an individual obligation and a basic supplementary pension. The analysis draws on literature, policy reports, and international examples. The focus is on old-age pensions; survivor benefits are beyond the scope of this report.
What are the key findings?
The paper finds that a pension mandate is feasible but important design choices have to be made. Systems with choice encourage innovation and competition but increase complexity and require more from participants. A single provider reduces selection risks and may lower costs but weakens incentives for innovation. Risk selection—providers targeting lower-cost participants—may arise under competition, requiring regulation such as risk equalization. Flexibility is important for self-employed workers due to income volatility and heterogous preferences, yet it may put pressure on the arrangements for employees.
What are the implications?
- Policymakers must balance simplicity (e.g., a single provider) against choice, as both affect costs, innovation, and feasibility.
- Effective enforcement, data sharing, and supervision are crucial for a functioning mandate.
- Differentiation for self-employed workers is allowed and can improve support but may create fairness concerns.
- Gradual implementation and clear communication are needed to avoid economic disruption and maintain public support.
