Saturday 22 January 2022

‘New pension plans aim to force funds to take more risks’

New rules for Dutch corporate pension funds will make the size of payouts less certain and force funds to take greater investment risks, RTL news reported on Thursday.

The broadcaster has obtained a copy of confidential documents which outline the plans, which junior social affairs minister Jetta Klijnsma hopes will come into effect in 2015.

The aim of the changes – which have been several years in the planning so far – is to ensure the Dutch supplementary pension system continues to work in the future.

Inflation

The draft legislation will force pension funds which cannot put up pensions by at least the rate of inflation to make cuts in their payouts rather than increase premiums.

Pensions can be increased if the funds ‘invest in stocks with a high forecast return’, the document states. But this can only be done if the funds are prepared to accept greater risks, the minister goes on. Pension cuts can be spread out over 10 years.

Risk

The new pension rules will transfer the bulk of the investment risk to the workers and pensioners, who will face pension cuts if fund asset managers get it wrong or if the stock market nosedives. 

Funds can opt to remain in the current system, but will have to avoid all risky investments, making it almost impossible to put up payments in line with inflation, RTL says.

The proposals will be discussed by unions and employers over the next two months and the minister hopes the new legislation will be finalised by the end of the year.

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