Design of the freedom of choice and customization of pension schemes


An (excessively) high spending pressure among young households, a difference in ideal retirement ambitions between tenants and buyers and a potential further restriction of the fiscal options to build up a pension are hot topics at the moment. Giving people a wider freedom of choice creates more flexibility, a better link-up with the personal situation and it can prevent ‘excess savings’. However, our experience with behavioral economics also teaches us that short-sightedness lies just around the corner. Short-sightedness and the gap between long-term goals and short-term behavior are a cause to force people to save. With too little social protection, people can make the wrong choices and save too little. That is why a solid choice architecture is vital.


Our research project addresses the question of how best to achieve freedom of choice and customization without adversely affecting the original goals of pension accrual.

Examples include:
– What are the consequences of a capping limit, a reduction of the accrual rate or a maximum pension accrual, for instance?

– What should customization for homeowners and tenants look like?


During this study, we follow on from Van Ewijk and Mehlkopf (2014) and Knoef, Been, Caminada and Goudswaard (2017). We simulate various limits and in our representative sample of the Dutch population, we find out about the costs and benefits of a bigger freedom of choice and reduced social protection for each household. Using the life cycle theory, we determine the benefits of more flexibility and the costs that may arise on account of short-sightedness and wrong choices. We simulate how many households get into trouble due to short-sightedness or wrong choices. This enables us to find good limits for social protection in the second pillar. We will distinguish various groups such as homeowners and tenants and groups on high and low incomes.

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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