Recent developments in Dutch pension systemInternational Pensions Conference
Montreal, june 9 2014Benne van Popta
Dutch three pillar pension system
Public/ universal/ paygo
Private/ occupational/ mandatory/
funded
Private/ personal/ individual choice/
funded
International Pension Conference of Montreal
Aim of the Dutch Pension System
A replacement rate of about 70% of average income (1st and 2nd pillar)
International Pension Conference of Montreal
First pillar
• Public• Universal• Benefit is fixed amount, not
income/ work related• Paid by part of the income tax
First pillar
International Pension Conference of Montreal
Second pillar
• Funded, assets about 140% GDP• Pensionfonds: industry-wide,
company, liberal professions• Number of pensionfonds: 400. Is
decreasing• Economies of scale, low investment
costs• Pension contract based on
collectieve labor agreements
Second pillar
International Pension Conference of Montreal
Why is the second pillar so large?
First pillar aimed at poverty prevention
We started early (1950/60s)
Mandatory: collective agreements are extended to non-members
Mandatory: consequence is that every employee participates
International Pension Conference of Montreal
PMT figures
Average wage: 33,000 euros/year
Average new pension 9,500 euros/year
Total average pensionincome (including first pillar): 29,000 euros/year
International Pension Conference of Montreal
PMT figures
33,170 employers, 570,000 participants
Asset: 48 billion. Costs assetmanagement: 35.4 bsp
Costs pensionadministration per participant (CEM 2012): 80 euros a year (peer average is 152 euros)
Average return, 5-years: 9.3% 10-years: 6.6% Since 1995: 7%
International Pension Conference of Montreal
Changes after dot.com bubble
From final pay to average pay
From unconditional to conditional indexation
Benefit haircut as a last resort measure
International Pension Conference of Montreal
Discussions after the financial crisis (1)
First wave of solutions last for about 5-10 years
(Automatic) increase in retirement age
Is there something in between flexible, collective DB and individual DC?
International Pension Conference of Montreal
Discussions after the financial crisis (2)
Risk sharing, intergenerational solidarity, individual choice?
Compulsory saving for retirement will stay!
Independant workers, self employed, small business owners?
International Pension Conference of Montreal
