Netherlands: reform of supplementary pension in the offing

Unions and employers have been saying it since 2006: nothing needs to be changed in the current supplementary pension scheme, which adds to basic pension (AOW). The financial crisis and the collapse of stock investments caused by Dutch pension funds have changed this. Dutch funds took huge risks with their recent investments. Their payback forecasts were too optimistic, writes the Commission in charge of studying supplementary pension, lead by Geert Goudswaard, member of the Social and Economic Council (SER). Demographic ageing doesn’t help. According to the Goudswaard Commission, contributions to supplementary pension schemes should get 50% higher by 2025 if the current pension level were to be maintained. Today, 13% of employees are entitled to supplementary; this number is going to reach 17% in 2025, which will be very heavy for the economy – over €25 billion in one year. The Commission is careful not to recommend a reform of pension funds, very powerful in the Netherlands, forcing them to invest less. On the contrary, it recommends either lower supplementary pensions or pensions to be paid later in life. Future pensioners should expect less than 70% of their salary – the current level allowed by supplementary pension. The government would like to pass a reform as early as this year. The Goudswaard Commission recommends starting by amending the pensions act to allow the social partners to negotiate more flexible agreements within the framework of collective agreements.