Solidarity buffer and solidarity preferences

“Social preferences reflect altruism, reciprocity and self-interest”

With the introduction of the new Dutch pension contract, many industry-wide pension funds opt for the solidarity contribution scheme that gives a prominent role to the joint buffer (solidarity reserve). However, to what extent do participants support this buffer and do social preferences in that support exist? We investigated this in a representative survey of participants in the 38 largest sector pension funds.

KEY TAKEAWAYS FOR THE INDUSTRY

• Funds should consider the social preferences among their participants when setting up and providing information about buffer rules.
• If many participants focus on their own interests and reciprocity, funds could appeal to this selfinterest by underlining that the buffer works both ways. In the currently chosen interpretation this is often not the case.
• More funds could focus on the buffer helping others during setbacks.