Chaos: the new pension system in the Dutch Senate.

The Dutch Senate (Eerste Kamer) has received a barrage of criticism relating to the new pension system. But where have insurers and PPIs been? Why have we not heard from them?

By: Berry van Sonsbeek, Product Marktmanager Zwitserleven

At the invitation of the Dutch Senate, various experts from the pension industry shared their views on the new system that is to be launched. You can rewatch the meetings held on 14 and 21 February 2023 on the website of the Dutch Senate

In terms of content, the experts contributed useful points for attention that deserve elaboration through amending Acts and lower-level laws and regulations. This relates to:

• the risks associated with conversion, both legal, actuarial and implementation-related;
• prompt, transparent communication with participants;
• participants' expectations of purchasing power retention in the new system;
• the time and capacity needed to complete this entire process by 01/01/2027.

Some opinions varied drastically, while other opinions reinforced each other. But where were the experts representing the insurers and PPIs during this verbal assault? The Dutch Senate seemingly did not consider it necessary to get input from this part of the pension industry. That's strange, considering around 20% of the population accrues or receives pension through an insurer or PPI.

We can also view this in a positive light. Perhaps – after reading all the documents – the Dutch Senate has come to realise that the Dutch Future Pensions Act (WTP) is business as usual for insurers and PPIs. After all, they have been familiar with implementing individual DC schemes since 1995. And the Flexible Premium Scheme (Flexibele Premieregeling) also has many similarities with DC schemes as they have been prevalent since the Dutch Premium Schemes (Improvements) Act came into effect. Assuming insurers and PPIs are not likely to start offering the Solidarity pension scheme, the transition to the new system is therefore a much less prospect for them than for pension funds.

Either way, it's a major operation. Insurers and PPIs also have a lot of work to do in order to make their customers' pension schemes WTP-proof by 2027. The main changes affect the surviving dependants' pension. They already use an equal premium percentage to that used for old-age pension accruals. Options advice as defined in the new law does require attention. These rules may take effect as soon as 1 July 2023 for all pension schemes. But insurers and PPIs have also been extremely well aware of this for years now.

My appeal to the Dutch Senate is – most importantly – to keep pace. Of course you should listen to all constructive advice in order to resolve obstacles to feasibility and enable a responsible transition to the new system. But make wise decisions and do not respond to pressure by rejecting the law. That would set us back more than ten years and undo tens, if not hundreds of millions in terms of investments. Worse still, we would miss out on a good opportunity to move towards a modern pension system that aligns with current situations and preferences.