Formalizing the new Dutch pension contract

Dutch employers and labor unions agreed in 2010 to support a major pension reform. The newly proposed contract replaces suggested nominal guarantees by “soft real rights”. The soft real rights are adjusted annually to unexpected real investment returns. In this paper we provide a formalization of this new Dutch pension contract with special emphasis on the market-consistent valuation of the entitlements and the investment strategy for the collective that is consistent with the promise made to the participants. For simplicity we restrict ourselves to the case of a closed fund and a single risk factor in financial markets.

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Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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