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Healthcare pension fund plans to switch to more risky system

Tuesday 04 December 2012

Health service pension fund Zorg en Welzijn has become the first Dutch fund to say it plans to switch to the new flexible pension system the government wants to introduce in 2015.

The fund plans to move away from defined benefits - where pensioners know how much pension they will get - to defined contributions, where premiums are fixed instead. This means pay-outs will vary in line with stock exchange developments.

At the moment, health service workers have a guaranteed pension of 70% of salary (including the state pension AOW). Under the new system, pay-outs will be determined by how much money is in the fund.

'In bad times it could be less,' fund director Peter Borgdoff told the Financieele Dagblad. 'We are not opting for maximum certainty because that means a more expensive and lower pension.'


Employers and workers still have to vote in favour of the move and legislation making the change possible still has to be finalised.

According to the FD there are other legal obstacles to overcome as well. Many legal experts warn that the capital which the fund has already built up cannot simply be switched into a new system. And several organisations are preparing legal action against a forced change,the paper says.

The government hopes the new set-up will lead to a more sustainable pension system as workers live longer. At the moment funds are being forced to cut payments and put up premiums because of the economic crisis because their assets no longer meet legal requirements.

The new system was agreed by unions and employers last year and adopted by the previous government.

Would you vote for the new pension system? Use the comment box below.

© DutchNews.nl


Readers' Comments

Stock exchanges are easily manipulative these days and thus a highly unreliable source to determine payout. Fixed income will be a better option.

By ufo | 4 December 2012 8:18 AM

This is another disaster waiting to happen. Run! don't walk away from risky business!

By AL | 4 December 2012 8:47 AM

If they make this transition, they first must first not only convert the defined contribution plan to a lump sum cash value, but they must then present rules for when that cash value is available to participants. Will these monies then be available for loans or emergency withdrawals for the individual participant? Who would regulate this activity, if so? What will be the penalty for early withdrawal? There are many pros to having a defined contribution plan, but who will oversee it?

By maria | 4 December 2012 9:44 AM

This is just all kinds of wrong! My husband (a civil servant for 25 years) already has to work two years work longer now. If his pension is cut based on the whims of a riskier market, how will we live? At least in the States one can retire with a full pension after 25 years and be young enough to work part-time or in another job. He will be too old to find other work to suplement his income. Do you see anybody over the age of 65 working here? I don't!

By M | 4 December 2012 9:49 AM

Retirement would be so much more fun if we could be kept guessing the amount of pension from month to month. A bad week for AAPL could lead to a senior citizen uprising. Nothing beats the smell of blue-rinse first thing in the morning...

By Dr Ponzi | 4 December 2012 10:50 AM

Dear M. Hopefully this move does not "cut" into anyone's pension. Theoretically it can increase it's value tremendously and help the economy. As a Cash value retirement fund, for example, a person should be able to "borrow" from their fund with no penalty, as long as it is repaid,for the purchase of a house or other major items. Would be great to make sure participants have access to their funds when needed.

By maria | 4 December 2012 1:05 PM

This is a no-brainer. Very few countries will be able to afford or justify defined benefit pensions apart from the base (AOW). Anyone arguing for a continuation of the status quo is effectively arguing for the shifting of risk from the pensioner onto the (smaller and smaller) tax payer. See http://www.thisismoney.co.uk/money/pensions/article-2068056/Public-sector-workers-pensions-worth-20-times-value-contributions.html for more.

By Financially literate | 4 December 2012 3:42 PM

Another scheme to fill up the pockets of managers and ruin the people who invested their money???

If it will be introduced, the government should be obliged to give an option to switch the pension to a regular pension fund


By D.V. | 4 December 2012 7:45 PM

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