Young people will probably have to pay for older people for decades
more to come under new Dutch pension plans, believes Jan Berghuis,
employee chair of Dutch metal pension fund PMT.

In an interview with Algemeen Dagblad, Berghuis expresses his concerns
about the signals he is receiving about the pension discussion within
the Social Economic Board (SER). This governmental advisory board is
preparing advice about a new future-proof pension system.

Berghuis disagrees with the intention to give every member their own
pension pot. Pension funds will then no longer make promises about the
height of the retirement income, while members will know the exact
amount of their pension assets.

However, in the new proposals the pension will become less certain.
Berghuis says the members of PMT attach more importance to the
certainty of retirement income and that individual pension pots, which
can fluctuate significantly, lead to more uncertainty.

“The advantage is that we will be able to provide pension indexation
earlier. The disadvantage is that we will also need to discount
pensions earlier in worse times,” he says. “Our members are welders,
bicycle repairers, metal workers. They have an average pension of 600
to 700 euro a month. They cannot bear a pension discount.”

The PMT chair is also concerned about the pension premium in the new
system. Currently young people pay too much premium and older people
too little, but adjusting the system will be a particularly costly
affair for older employees. They have paid too much when they were
younger, but don’t benefit from the lower premium at a later age.
Repairing that setback could cost €100bn, the Dutch Central Planning
Bureau has calculated.

“What I’ve heard is that the young people will end up paying the
price,” Berghuis says. “The idea is to not lower their premium. The
extra money will then be used to compensate the older employees. That
means that young people will need to pay the price for the transition
to a new system for the next few decades.”

He fears that this will erode public support for the new system. Young
people will end up paying more premiums, which will not be reflected
in their pension pots. Berghuis therefore advocates sharing the burden
among all pension fund members: employees and pensioners.

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