Despite strong opposition to the “collapse of the best pension system in the world”, the Dutch Parliament yesterday approved the move to a new contribution contract comprising a life cycle system and personal pension funds. However, many questions remain about implementation. In all Dutch pension contracts, investments must be made on a life cycle basis. This means that investment risks should decrease as retirement approaches. Specifically, it also means that annual investment returns vary with age. This can be done in different ways. For example, pension funds can still invest consistently and allocate returns by age. According to the FD, the unions will now discuss the agreements with their members and Koolmees hopes that the new strategy can be presented to Parliament before the summer recess. However, according to Financieele Dagblad, this means that two pension funds actually operate side by side and the costs will therefore increase. During the debate, several opposition parties presented proposals calling for the abolition or delay of pension reform, which were rejected. In line with the draft reform published last month, pension funds have discretion over the occupancy and use of the solidarity reserve. Finally, the agreement mentions in principle that the parties are in consultation with the European Commission to clarify the European legal viability of compulsory pension funds at the sector level.
After the removal of both the single contribution rate and the solvency cushions, we believe that there is little reason why the Dutch exemption position can be justified. From the date of the worker`s retirement, the payment for life of an old-age pension and partner pension with the accumulated capital is acquired. Under the new system, workers can receive 10% of the accumulated capital in the form of a lump sum payment. In the new system, less emphasis is placed on security and safeguards. Instead of a pension benefit, there is a pension expectation. This is a significant change for workers who are now participating in a defined benefit-based retirement plan. Under the new system, the contribution is the same for all ages. Existing defined contribution plans, with an age-based premium scale, can be maintained for current staff. The lump sum contribution applies to new employees. In the short term, union members will vote on the principle of the agreement. If they agree, legislation will soon be finalised to guarantee a freeze on the state`s retirement age and avoid reductions in 2020.
/ Detailed drafting of the agreement will be ongoing and legislation is expected to be completed in 2022. Parliament will set up a steering committee to develop the new pension system and the transition framework. Two pension experts told the daily De Volkskrant this week that they suspected that the solidarity cushion would “most likely” be used to allow pensioners to be indexed, which could break up the intergenerational conflict that pension reform should put an end to.