Inter- and intragenerational solidarity among Dutch citizens

A pressing question about the future organization of the Dutch pension system is whether the level of solidarity among pension funds participants can be maintained. As a result of the mandatory enrollment in the pension funds associated with their employers, the Dutch pension system inherently enforces solidarity in various dimensions (Hoff 2015). For example, through collective risk-sharing, solidarity occurs within a generation of pension savers and due to risk-sharing over time, solidarity between generations is also an integral element of the current system (Bonenkamp et al. 2014).

The maintenance of solidarity within the second pillar of the current pension system is facing challenges due to increasing heterogeneity of pension participants (e.g., diverging job careers, increasing differences in education levels), demographic changes (aging) and increased labor market flexibility. In addition, in recent years a shift of the investment risk from the collective to the individual participant has taken place (Dellaert and Ponds, 2015). In a collective arrangement this increased heterogeneity of pension funds participants almost inevitable leads to more redistribution within and between generations through risk-solidarity. The question arises whether participants are willing to bear the increased costs of solidarity and if so to what extent?

Participants’ preferences for solidarity may survive regarding unexpected individual (micro) risks, but will they also do so for differences in collective (macro) risks (e.g., differences in life expectancy)? How are preferences for solidarity related to individual socio-economic characteristics? For instance, are higher educated more solidary with lower educated, are women more solidary with men? Or is it the other way round? Answers to these questions are crucial for targeted and effective pension policies. In order to get these answers it is necessary to measure the link between socio-economic characteristics (including generation membership) and preferences for solidarity within and between generations. So far only questionnaire studies have been conducted, eliciting the opinions on solidarity (van Dalen and Henkens 2016, Hoff 2015). Interestingly, Hoff (2015) found that there are some indications for limits in the willingness to stand in for other population groups.

These studies are important and suggestive. They do, however, elicit only opinions and suffer of the inherent noisiness and potential inconsistencies (due to socially desirable answers) related to survey responses. In particular, one cannot assess if and how stated attitudes regarding pension solidarity are reflected in actual behavior. Using methods from experimental economics and linking actual choices to administrative data provided by the Central Bureau of Statistics (CBS), this topicality project will provide a first link between preferences for intra- and intergenerational solidarity revealed through choice and socio-economic characteristics in a representative sample of Dutch citizens.

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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