Recent developments in Dutch pension system International Pensions Conference
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Transcript of Recent developments in Dutch pension system International Pensions Conference
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
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Aim of the Dutch Pension System
A replacement rate of about 70% of average income (1st and 2nd pillar)
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First pillar
• Public• Universal• Benefit is fixed amount, not
income/ work related• Paid by part of the income tax
First pillar
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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
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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
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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
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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%
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Changes after dot.com bubble
From final pay to average pay
From unconditional to conditional indexation
Benefit haircut as a last resort measure
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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?
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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?
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