Over the next five years, the Netherlands will transfer all pension assets to a new system, which must be better, fairer and more modern. This would make the system future-proof again.
We believe that the new system does not meet social needs, puts an unnecessary amount of risks on participants, and that it therefore has dubious support and future-proofing. That is why we are arguing for a value-fixed basic pension on top of the AOW, to which everyone who works makes a contribution.
The AOW as a basic income for the elderly is currently too meager. Simply increasing this extra is an option, but that ignores the responsibility of citizens to build up a supplement themselves during their working lives.
Security
Society wants more certainty over potentially higher, but uncertain pension outcomes, research has shown time and again. We believe that two things are needed: more certainty for low pension accrual and citizen involvement in that part of the pension accrual where he/she is at risk.
This involvement does not come naturally and takes time, but is essential for the support of a new pension system. It is simply not appropriate to sideline citizens, but to confront them with all the risks. Citizens must be taken seriously.
Social partners
The reform of the pension system is now left to the social partners. That leads to (eventually) untenable compromises over the heads of all of us.
The most striking are the self-employed and flex workers who are left out. According to research institute Netspar, 40 percent of workers are self-employed or flex workers. They – the parties responsible for employee pensions – above all safeguard their trusted role in terms of employment conditions.
Employers want lower pension contributions. The trade unions want to keep the characteristics of the existing collective employee pension intact as much as possible, but have insufficient focus on sustainability and confidence in the pension system. The citizen is sidelined, his wishes are not heard, while serious financial setbacks remain possible.
cut
Our plea is to make a cut in the employee pension. There will be an inflation-proof capped pension component that participants can count on. This is the basic pension that reinforces the AOW.
Opting for income security instead of investment uncertainty is central here. The cut means that part of the pension pot will be segregated within the current pension schemes. And future premiums for this are collected separately.
With this pot, the basic pension remains fully funded and is therefore not paid from tax resources such as the AOW. However, the government could function as a backstop in the event of setbacks.
There is some room for this because the government has a huge tax claim on pension funds due to the deferred taxation. This basic pension can be made accessible to self-employed persons and flex workers, it is a scheme that must be available to everyone.
Risk
And there will be a pension component above that in which participants do run all the risks; this is offset by the remaining part of the pension assets held by pension funds.
This may be in line with the pension agreement in which the pension assets are invested collectively, but are split up according to (years of) participants. People therefore have a view of their ‘own’ pension pot, in which some freedom of choice of investments can also be built in within the collective of their own year. Ultimately, this may become more individual, provided usury policy-like situations are avoided. Then there would also be room for specific investment wishes such as: prefer green, or not in fossil fuels.
Direction
We have had a Minister for Poverty Policy, Participation and Pensions since the beginning of this year. This indicates that the government recognizes that it must take control of the pension system as a whole. After all, there is no ‘owner’ who tests the system for balance with the interests of citizens and society as a guideline.
For more than ten years now, social partners have been hustling about the pension transition. We would like to see them revitalize their role in pensions. Use the vast pension knowledge in the Netherlands and improve the pension agreement in the interest of all of us.
So back to the only correct question of what the pension system is for: how to prevent poverty and to ensure that citizens build up a pension, and that, where possible and desirable, based on their own responsibility.
Rob Bakker is a former director of pension funds
Arnoud Boot is professor at the University of Amsterdam
Reinout van der Heijden is editor-in-chief of the Geldgids