Towards a new Dutch pension system?
Last update: July 9, 2016
On July 6, 2015, State Secretary Klijnsma (Social Affairs and Labour) sent a letter to the Lower House about the main ideas for a future organization of the supplementary pension system in the Netherlands. “It is essential that we retain the strong elements of our pension system and enforce it with new elements for the future. This way, we can ensure that the pension system will better suit the needs of the people and the 21st century labour market.”
The 4 main ideas are:
- Adequate pension for all working people
- Discontinuation of the uniform contribution system
- A more transparent pension, with room for collectivity, and
- Tailored solutions
By now, the options have been explored a bit further and in July 2016, the Framework Memorandum ‘Future of the Pension System’ was sent to the Lower House. In this memo, the government presents several options to ensure that the supplementary pensions system will better suit the 21st century labour market, where people retire later, change jobs more frequently and work as self-employed people more often.
Although the ideas for a new pension system are not quite definite, the outlines are becoming clear. The transition to a new system will be complicated. And how this transition can be done as smoothly as possible, still needs to be explored. In addition, not all ideas have been fully developed yet. As a result, it is not clear to what extent the ideas about a new pension system should and can be taken into account at this point.
The two topics that affect current pension schemes most directly are:
1.Discontinuing the uniform contribution system and transitioning to a degressive pension accrual
2.New possible contract types
1.At the moment, most pension schemes either have a uniform pension accrual (percentage-wise) for all ages, or an increasing contribution percentage in case of a defined contribution scheme. Given the fact that pension costs increase as the retirement age approaches, this means that pension costs are higher for older employees than for younger employees. More and more, this is seen as a drawback of the current pension system. This is why a percentage-wise degressive pension accrual is considered to be a fairer pension claim, because the pension costs will be more equal for all ages. It has been decided that the degressive pension accrual will be introduced, but it is still unclear when and how the transition will take place. Without transitional measures, the older employee will in fact be put at a disadvantage by the degressive pension accrual. A transition period of 25 years is now being considered, but a reduction of this period to 10 years for example, is also being explored.
It seems appealing to take a uniform contribution for all ages into account from now on, but this does not quite match the current (fiscal) pension legislation. However, this does not mean that there are no options in this direction at all.
2.In addition to more uniform pension costs, explorations also addressed the issue how the pension claims can be made less sensitive to interest fluctuations and life expectancy developments. This can only be achieved if the pension claim becomes less secure. This appears to be necessary, because the costs of a secure pension have become too high. Another subject of research was how the pension claim can be a better match with people’s personal situation and preferences. It was indicated however that it is more economical to hold on to forms of collective risk sharing. It appears that different contract types will continue to co-exist; social partners determine which contract type suits their sector/company best.
The contract types that seem to be possible now, are:
a.the current more or less guaranteed claim,
b.a type of ambition agreement,
c.a personal pension asset with collective risk sharing (buffer), or
d.a defined contribution scheme, as is already possible now.
For the two other topics, adequate pension for all working people and more tailored solutions, several suggestions were made, but no definite choices were made yet.
