Report on Assumed Interest Rates Sent to Dutch Parliament

At the request of the Dutch State Secretary of Social Affairs, Lans Bovenberg, Theo Nijman, and Bas Werker have outlined the advantages and disadvantages of various implementations of the assumed interest rate for the new Improved Defined Contribution Scheme Act (wet Verbeterde Premieregeling). The bill will allow participants of DC schemes to incur investment risk during the payout phase. The assumed interest rate has a tremendous impact on the development of future pension payments. It is also important for creating a level playing field for the different pension contracts being made possible by the new law. Careful political consideration of the advantages and disadvantages of the possible implementations of the projected interest credit analyzed in the report is therefore certainly in order.

The report can be found (in Dutch) on the Dutch government’s website (www.rijksoverheid.nl). The calculations in the report are based on this spreadsheet, which outlines the effect of assumed interest rates on benefits in a simplified setting.