THE DUTCH PENSION SCHEME: Relevant Netspar Research in the 2020 Framework Memorandum
On July 4, 2020, the Dutch cabinet and the social partners reached an accord on the details for the new pension agreement. This constitutes an important step forward in reforming the Dutch pension system. The system is becoming more personalized and transparent. Also it will respond to economic developments more quickly. This will provide greater potential for indexation, but also for cuts… Many questions remain. How exactly will the system be further structured? What might the preferred choices for fund administrators be? How well does the new system accommodate today’s labor market? Will the new system make it easier for independent contractors to save for retirement? Is the new system less confusing? How do you communicate uncertainty? And how do you restore confidence in the system?
In this dossier, we rely on the findings from our existing (topical) research to provide insight and clarification on the main features of Minister Koolmees’s letter to the Dutch cabinet from June 2020 and the pension agreement. We zero in on three principal themes:
|Pension Agreement Time Line
The past years there have been many steps towards the construction of the new pension agreement. Here we provide a short time line with mportant staps (and related Netspar-research) of the past year.
Will the new pension contract put an end to the generational conflicts related to pensions? Two contract variants have been proposed, with the definitive choice yet to be made. What are the new contract forms for pension funds? Will this help us move from perceived promised results to realistic expectations? What will it mean for the distribution of risks and returns across generations?
- Listen to the podcast about the new pension contract with Bas Werker (TiU), Dick Boeijen (PGGM) en Martine Wolzak (FD) (in Dutch)
- Watch the knowledge videos on the new pension contract with Bas Werker (TiU) in collaboration with pension educators SPO (in Dutch).
- “Flash webinar: Wat verandert het pensioenakkoord… en wat niet?” (What is changing in the pension agreement… and what remains the same?, Bas Werker (TiU) (In Dutch)
- “Renterisico, lifecycle en pensioenakkoord” (Interest-rate risk, the life cycle, and the pension contract), Netspar Brief, Roel Mehlkopf (TiU) (in Dutch)
- “Welke vaste dalingen en welk beleggingsbeleid passen bij gewenste uitkeringsprofielen in verbeterde premieregelingen?“, Johan Bonekamp, Lans Bovenberg, Theo Nijman, Bas Werker (allen TiU) (in Dutch)
- “Het effect van de vaste daling en het smeren van schokken op variabele uitkeringen“, Anne Balter en Bas Werker (beide TiU) (in Dutch)
Bas Werker: Return allocation in the new pension contract
Bas Werker: Project efficiency in the new pension contract
The pension agreement specifies that pension contributions will not be age related. The more or less firm commitment to future life-long pension benefits is being abandoned and the system of uniform contributions will disappear. Accrual will occur through a defined contribution scheme with equal contributions for young and old. The transition to the new system raises many questions and costs. The guiding premise is to evenly distribute the costs and benefits of the transition across various generations. In addition, the survivors pension is being redesigned to be simpler and more uniform.
- Watch the three knowledge videos by Casper van Ewijk (in conjunction with pension educators SPO) addressing the transition from different perspectives, for example “Transitie binnen de premieregeling“. (in Dutch)
- “De bepaling van de marktwaarde van bestaande aanspraken in een uitkeringsovereenkomst” (Determining the market value of existing entitlements in a defined benefit plan), by Bas Werker, Theo Nijman, Marcel Lever, Theo Kocken, Sacha van Hoogdalem, Lans Bovenberg, Kees Bouwman, Jan Bonenkamp, Dick Boeijen en Anne Balter. (in Dutch)
- “Lage rente en de houdbaarheid van pensioenen“; kapitaaldekking versus omslagstelsel (Low interest rates and pension sustainability: Fully funded versus pay-as-you-go systems), Netspar Brief 20, Casper van Ewijk (TiU). (in Dutch)
- Legal aspects: “Wijzigen van de bedrijfstakpensioenregeling: tussen pensioenfondsbestuur en sociale partners” (Changing industry pension schemes: Between pension fund administrator and social partners), Jop Tangelder (RUN). (in Dutch)
- “Nabestaandenpensioen niet verzekerd” (Survivors pension no longer assured), Netspar Brief door Michael Visser en Bastiaan Starink (beide TiU). (in Dutch)
Casper van Ewijk: The transition from benefit agreement to the new contract
Casper van Ewijk: The transition from a benefit agreement to an improved contribution scheme (WVP)
The pension system is often seen as vastly complex; it is based on convoluted processes. Who understands these? And how do you explain them? Another facet here is that the new system will move more in tandem with economic developments. There is a greater chance of indexation. Yet, if the economy does poorly, there is also a greater chance of cuts. What is the best way to communicate this “uncertainty,” and is there a way to still build confidence?
- Listen to the podcast on pension communications and working on understandability and confidence with Martine Wolzak (FD), Marike Knoef (LU) en Hans Hoeken (UU) (in Dutch)
- Watch the knowledge videos on the new pension contract with Marike Knoef (LEI) in collaboration with pension educators SPO: How do you explain it? And “how do you communicate uncertainty”? (in Dutch).
- More freedom of choice/lump sum: “Keuzes rondom pensioen: implicaties op uitkeringssnelheid voor een heterogeen deelnemersbestand“, Servaas van Bilsen (UvA), Johan Bonekamp (TIU) en Eduard Ponds (TIU en APG).
- “Pensioenbewustzijn verhogen met brieven en sociale media” (Raising pension awareness through letters and social media), Marike Knoef, Jim Been en Marijke van Putten (LEI i.s.m. Pensioenlab)
- “Het gebruik van sociale normen bij het activeren van pensioendeelnemers” (Using social norms to motivate pension participants), Joyce Augustus-Vonken (APG), Lisa Brüggen, Thomas Post en Pieter Verhallen (Maastricht University)