Overview of Netspar research on theme’s in the new Dutch pension scheme
In June 2019, the Dutch government and social partners concluded an agreement for the reform of the Dutch pension system. The advice of the social economic council (SER) on the revision of the pension system, starts from the idea that the strengths of the current system are retained and the weaknesses tackled. The reform must lead to a more sustainable system that:
- offers earlier prospects for an inflation-proof retirement income;
- makes pensions more transparent, understandable and individual;
- is more in line with developments in the labor market and society at large.
Netspar’s ambition is to map out the policy options to achieve the above and to facilitate a well-informed pension debate. Many questions still are unanswered and Netspar will contribute to these answers.
In this overview, we use existing Netspar research to provide content, depth and interpretation of main points from the government statement Minister Koolmees (February 2019) and the pension agreement. In addition, we refer to ongoing research on various themes from the agreement.
A new pension contract
From Minister Koolmees’ letter to parliament: the SER makes a proposal for a premium scheme in which participants accrue pension entitlements, but steering towards security by means of a buffer is abandoned.
- Forthcoming: Valuation Frameworks for Defined Benefit Plan Rights, Bas Werker, Lans Bovenberg, Theo Nijman, Netspar Topicality project
- Forthcoming: Design of compensation in case of system change to a degressive accrual system, Dick Boeijen, Mark Heemskerk, Niels Kortleve, René Maatman, running Netspar Topicality project
Personal pension assets with collective payment phase
From Minister Koolmees’ letter to parliament: “Since 2016, it has been possible under legislation to agree a premium scheme whereby each participant builds up a personal pension capital during his or her working life, with which he or she gradually enters in the period before retirement in a benefit collective in which risks are shared. By abolishing the uniform contribution system and switching to age-independent contributions, the Improved Defined Contribution Scheme Act will also become a more accessible alternative for industry-wide pension funds. The SER considers it necessary that there are guarantees that the obligation to the fund is maintained in this contract. The government will examine whether the macro-longevity risk can be shared in a more targeted manner. The Cabinet will legally guarantee that all contracts will include investment risks in accordance with a life cycle pattern with a risk attitude per age cohort.”
- Default life cycles for retirement savings, Anna Grebentikova e.a., 2017
- How costly is it to ignore interest risk management in your 401k plan? Servaas van Bilsen et al, 2018
- Shared Interests for longer: on Solidarity and Sharing Longevity Risk, Netspar Brief 13, Michel Vellekoop en Anja de Waegenaere, 2018
- Forthcoming: Repercussions of Terminating Mandatory Contributions, Erik Lutjens en Fieke vd Lecq, Netspar Topicality project 2019
State pension age and working longer
From the principle-agreement: The government is prepared to freeze the state pension age for two years at 66 years and 4 months, and then gradually increase it to 67 years in 2024. That is three years later than planned. For the long term the following applies: for each year that the average life expectancy rises, the retirement age does not rise by 1 year, but by 8 months. In addition, people in difficult occupations (and with low incomes) are given the opportunity to retire three years earlier, by having the early retirement penalty for employers only start from a brute wage of 19,000 euros.
- Bottlenecks and policy options for flexible retirement, report Netspar project group, 2019
- Working Beyond Retirement Age: What Do Employers, Employees, and Independent Contractors Think? Netspar Brief 16, Jaap Oude Mulders en Marleen Damman, April 2019
- Later Retirement: Decisions for Now and Later, Netspar Brief 12, Daniel van Vuuren, December 2018)
Pension for the self-employed
From the principle-agreement: It should be possible for the self-employed to voluntarily join a pension fund or Premium Pension Institution (PPI). There will be no compulsory scheme, but it must become easier to participate. There will also be compulsory occupational disability insurance (with opt-out).
- Working Beyond Retirement Age: What Do Employers, Employees, and Independent Contractors Think? Netspar Brief 16, Jaap Oude Mulders en Marleen Damman, April 2019
- Retirement savings adequacy of the Dutch self-employed without employees, Jim Been, Kees Goudswaard, Koen Caminada Marike Knoef, Wim Zwinkels, 2017
- Forthcoming: Simplicity and flexibility with regard to pension savings for the self-employed, Marike Knoef en Max van Lent), Running Netspar Topicality paper (2019)
- Forthcoming: Design and Creation of an Opt-out System, Jona Linde, Netspar Topicality Project
Transparency, communication and trust
From the SER advice: Communication and more transparency are essential elements of the pension system reform. These must contribute to improving confidence in the system.
- Amount of pension benefit closely connected to trust in the pension system,(Martin Olsthoorn, SCP, juni 2019)
- More Choice Does Not Lead to Greater Pension Engagement, Netspar brief 15, 2018, Lisa Brüggen and Thomas Post
More freedom of choice
From the principle-agreement: the SER advises people to be given more freedom of choice with regard to their pension. Each participant is given the option of including a part of their pension benefit on the retirement commencement date as a lump sum. This part will amount to a maximum of 10% of the value of the retirement pension saved up for this member. This advice is in line with the government’s objective of introducing more options into the pension system.
- The Value of Customization in Pensions, Netspar Brief 8, Roel Mehlkopf e.a., 2017)
- Options for Choice in pension decumulation: international experience, Marcel Lever, Eduard Ponds, 2018
- Forthcoming: Interaction between determinants of payment speed: high-low, lump sum, fixed decrease and effective date (Eduard Ponds, Johan Bonekamp, Servaas van Bilsen, Netspar Topicality Project
Partner’s pension
From the principle-agreement: the SER points out that both proposed contracts also cover short-term risk (survivor’s pension) and continued pension accrual in the event of disability. In accordance with the coalition agreement, the SER states that when the pension system is revised, the survivor’s pension will be more standardized, become more adequate and understandable and risks will be reduced.
- Survivor’s Pension no Longer Assured, Netspar Brief 11, Bastiaan Starink, Michael Visser, 2017
- Forthcoming: Survivor’s Income Position (Jeroen van der Vaart, Raun van Ooijen, Rob Alessie), Netspar Topicality Project
