Dutch regulator De Nederlandsche Bank (DNB) can now fine pension funds half a million euros or more if they fail to apply the prudent person principle or do not comply with management requirements.
The official retirement age for the Dutch state pension (AOW) will not be raised in 2024 following a slowdown in the life expectancy forecast, Wouter Koolmees, minister for social affairs, has announced.
The state pension age in the Netherlands is based on an annual longevity estimate from Statistics Netherlands (CBS) and the legal formula for the retirement age.
At present, a 65-year old has a life expectancy of 20.63 years, while the AOW age has to be raised at 20.76 years. In 2012, the cabinet decided that the AOW would gradually rise as of 2017— from 65 at the time to 67 and three months in 2022 — in order to keep pensions provision affordable for the future. It included a five-year leeway to enable workers to make additional savings for their pension.
As of 2022, the official pensionable age will rise in accordance with life expectancy. During the past few years, the government had concluded that the retirement age didn’t need to be raised further in 2022 and 2023, as life expectancy was expected to increase further, but not in a straight line.
Following consultations with their memberships, the unions presented a joint statement stating that the “lack of structural solutions” on most issues meant they would walk away from negotiations.
Stumbling blocks included the retirement age for the state pension (AOW), early retirement options for workers in hard physical jobs, accommodating self-employed workers into the pensions system, and the discount rate for liabilities. FNV, CNV and VCP, the country’s biggest unions, accused the cabinet of wanting to delay solving these problems.
“However, structural solutions were crucial to the unions,” said Han Busker, chair of the largest union, FNV.
The unions rejected an offer from the government to slow down the AOW age rise by two years, reaching 67 in 2024. The government had offered to set up a committee to look into the disputed mechanism that linked the state pension age to life expectancy increases after 2022, when the retirement age is set to rise to 67 and three months.
At the presentation of their third-quarter results, three of the country’s five largest schemes indicated that a cut to pension payouts and accrued pension rights remained a real threat in the coming years.
Corien Wortmann, chair of the €419bn civil service scheme ABP, said she could no longer explain to members that her pension fund was not allowed to grant indexation for the forseeable future, even though the economy was booming and salaries were rising. “This should be a strong encouragement to put lots of work into a new pensions system,” she stated.
ABP’s funding has been improving in recent months and rose to 104.7% over the last quarter, exceeding the minimum required level by 0.5 percentage points. Wortmann said this would limit the chance of cuts next year to almost zero, but would not allow for inflation compensation for a number of years. Dutch schemes cannot grant even partial indexation until they reach a funding ratio of at least 110%.
Peter Borgdorff, chairman of the €203bn healthcare scheme PFZW, said it was still too early to exclude the possibility of cuts as the scheme’s funding stood at 101.5%, despite improving 0.9 percentage points in the third quarter.