Pressure is mounting in the Netherlands for a major overhaul of the current three-tier pension system, with a string of influential organisations and people calling for wholesale reform.
The government’s most senior advisory body SER on Friday called for the introduction of personal pensions with collective risk-spreading to replace the current system of supplementary pensions.
The Dutch pension system is based on three parts: the state pension AOW, payable in full to everyone who has lived in the country for more than 50 years and at reduced rates for others; collective company schemes, which are usually compulsory; and private pension schemes.
The system is widely regarded as one of the best in the world.
Last year, however, research by the government’s institute for social policy SCP showed that support for the current pension system is fading, particularly among youngsters, job-hoppers and the highly-skilled.
Almost half of the under-35s are fed up with paying for other people’s pensions and consider that being part of a collective pension scheme will be financially disadvantageous to them personally, the researchers found.
Now SER is recommending the setting up of a new private pension scheme system in which everyone would be able to see exactly how much they have build up. The scheme would be based on the individual, but the risks – investment, risking life expectancy, invalidity and early death – would be shared between all participants.
This system would not increase the size of pensions, but would make them more stable, SER chairman Mariette Hamer told the NRC on Friday.
Meanwhile, central bank president Klaas Knot says the Netherlands should move to a new system quickly.
Knot told a seminar on Thursday that even though a change will be a major operation, ‘we should not wait too long’. A new strategy is needed to restore faith in pensions, he said.
A new system should make it clear what everyone is entitled to, so that there is no dispute between young and old about dividing up the pension pot, he said.
Dozens of company pension schemes have been forced to freeze or cut pensions in recent years because of the low returns on their investments. This, Knot said, is unlikely to change in the future because interest rates are being kept structurally low.