NDC pension: an alternative for the Netherlands?

In the recent Netspar Brief / CPB Policy Brief ‘Low interest and the future of pensions’ (2020), the NDC pension (‘Non-Financial Defined Contribution’) is discussed as an alternative to – part of – the current second pillar of supplementary pensions . The NDC pension offers a supplementary pension, but on a pay-as-you-go basis within the first pillar. It includes all workers (including the self-employed) and offers a welfare-based pension that is linked to development of wages. The NDC was successfully introduced in Sweden at the end of the last century; comparable systems have been introduced in various other countries, often in combination with a certain capital reserve.

This topicality project investigates the possible contribution of an NDC pension to the pension system in the Netherlands and examines the question of how it can be practically designed and implemented. The research questions are:
1. How do NDC and similar variants work, what (administrative) return is used, how are benefits indexed and how does the stabilization mechanism work?
2. In what way can NDC contribute to more stable pensions and better risk sharing in the Netherlands?
3. How could NDC be integrated into the Dutch system? How does the NDC pension relate to the current second pillar and what does the transition path look like?

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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