The Dutch Government, some unions and employers have agreed on a deal to radically reform the Dutch pension system, with the formerly defined-benefit scheme edging towards a more hybrid defined-contribution arrangement.
Employees must now share some of the risk, with corporate pensions no longer guaranteed against market downturns.
Market downturns will be spread over a 10-year period, with companies and employees able to set risk/return levels for their respective funds.
The winding up of the centrally-controlled system will provide major challenges for funds both in terms of deciding investment strategy, handling the liability side of their balance sheets but also communicating with members.
Premiums will also be split between workers (one-third) and employers (two-thirds) and employers will no longer have to bear the risk of a downturn and have to top-up funding levels.
It is hoped these changes will avoid the so-called “crunch” that underfunded Dutch pension funds found themselves in 2008 and 2009.
The Dutch Government also announced that the state pension age would go up from 65 to 66 by 2020 and flagged a further increase to 67 by 2025.
State pensions would also rise 0.6 per cent plus inflation per year from 2013 to 2028.
Dutch Prime Minister Mark Rutte (pictured) described the deal as the biggest shake up of the Dutch pension system since World War II and said it was a deal involving hundreds of millions of euros.
Major general workers’ union FNV Bondgenoten has recommended its 1.4 million members reject the deal, saying it does not provide enough assurances on payouts.
The deal must still be passed by the Dutch Parliament and will be also need to be approved by a number of unions.