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Saturday 26 May 2018


Spring Conference

Slow uptake of Dutch variable annuities

Written by Ilonka Oudenampsen

Variable annuities are off to a slow start in the Netherlands, as it is only offered by a handful of providers and few people choose a variable retirement income, Dutch daily newspaper Financieele Dagblad has reported based on research by Focus Orange.

A variable annuity, which fluctuates in line with the market and interest rate, is intended to provide a solution for people with a DC pension. More than a million Dutch people currently have a DC pension and this group is expected to increase over the coming years.

Individuals with a DC pension need to buy an annuity upon retirement. This used to be a fixed amount, but since last year it is possible to buy a variable annuity.

In case of a variable annuity, the retirement income is bought on an annual basis, rather than all at once. The rest of the retirement savings will continue to be invested. Pensioners will therefore continue to profit from interest rate increases or investment returns, which could result in a higher retirement income. However, they also risk a lower income if interest rates or investments fall.

So far four commercial parties have announced to be able to provide a variable annuity, but clients generally still opt for a fixed annuity. At Nationale-Nederlanden between 5 per cent and 10 per cent of clients opt for a variable annuity. At Aegon, this percentage is already at 25 per cent. Both insurers expect a further increase in future.

“Partly because pension providers are not or barely offering variable annuities, advisers are not discussing them much either,” pension advisor Cindy Centen of Focus Orange told the FD. “That’s why most people who are retiring are unaware of the option and therefore don’t ask for a variable annuity.”

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