Internationally, the Netherlands is causing a stir with its pension reform. And while Onno Steenbeek, Managing Director Strategic Portfolio Advice at APG Asset Management, detects drive and execution power, he also recognizes that a successful renewed system has a number of prerequisites. “Good communication is one of them.”
Pension reforms happen all the time in all countries. “That is not surprising, because all pension systems are facing the same challenges to a greater or lesser extent: aging population, rising life expectancy, low real interest rates and returns. It seems that the participant will be paying more for a lower pension that also starts later,” said Steenbeek in response to an article he recently wrote for PensioenMagazine together with Benne van Popta, board member and chairman of the Asset Management Committee of Bpf Detailhandel. “Keep in mind, incidentally, that participation rates in many countries are low and getting lower in response to the costs of aging. The big plus of the system change in the Netherlands is that we have retained the advantages of collectivity; social partners still take responsibility for company-wide or sector-wide agreements and the mandatory system ensures that everyone participates. That still leaves the concern of what to do with the growing group of self-employed workers.”
The observations
Steenbeek and Van Popta base their article primarily on the interviews they conducted for the Netspar report “Transition to a new pension contract in the Netherlands: Lessons from abroad,” published in 2021. This report contains a number of observations from major reform projects in other countries. For example, according to Steenbeek and Van Popta, international examples teach that the reform must fit the problem, be technically feasible, be accepted by enough stakeholders and not stand in the way of future adjustments. “In addition, careful communication is crucial to get the changes widely accepted. But the ‘why question’ is not currently being answered by everyone in the same way. Why are we introducing a renewed system? Exactly what problem are we solving with it? What will society notice? How will it affect the participant?”
Unique character
The unique character of the Dutch pension reform makes a clear and consistent narrative difficult, he realizes. “The renewal of the pension contract in the Netherlands is moving from a hybrid DB-like construction (defined benefit, defined contribution plan, with a promised benefit amount as the starting point, ed.) to a hybrid DC-like construction (defined contribution, premium plan, where the premium is fixed but the final benefit amount can be variable, ed.). With a different mix of collective and individual elements and risk sharing that appears to be disappearing, but will return in a different guise. In short, the starting point is hybrid and the end point is hybrid, so it is difficult to explain what the essence of the change is.”
Dutch citizens are currently finding that communication about the revamped system is challenging, while outsiders have been pointing it out from the beginning. “Different stories are being told about both the initial situation and the final situation of the new pension contract,” Steenbeek and Van Popta say in the article for PensioenMagazine. Nonetheless, Steenbeek said in his supplementary response, he detects drive and execution power. “The industry is doing a lot. And APG even more: it would be nice if we could eventually make APG employees ambassadors for the system change; or that they could at least explain the core message themselves.”