In the pension-nerd community, the Dutch are renowned for their creativity and prudence. According to the New York Times, Dutch corporate pensions are the gold standard. They’re well funded, cover 90 percent of Dutch workers, and replace 70 percent of income.
Compared with defined-benefit plans in the U.S.—rare, underfunded, and governed by accounting standards derided by almost every economist—the Dutch pension system looks even better. It does have a weakness, though, one that’s often overlooked, even though it may be the only aspect of the Dutch system that’s likely to be adopted here: In the Netherlands, annual cost-of-living increases depend (PDF) on the health of the pension’s balance sheet. If returns fall, benefits don’t increase. If the fund performs badly enough, pensioners may even suffer benefit cuts.
