Doubts about the new pension agreement in the Netherlands grow, as economists, pension experts and even the Regulator voice concerns about the robustness and sustainability of the proposed plans.

One of the main criticisms is that there might be no money left for the younger generation. The new agreement says that pension funds no longer need a buffer, so in the event financial markets go bad the fund can top up the pensions of current pensioners with reserves that are meant for later generations.

However, the potential for reserves to fail to sufficiently recover has caused concern.

Mark den Hollander, head of investment solutions at Implemented Client Solutions at ING Investment Management, explained that the unions will have a lot of influence on the eventual agreement.

“The younger generation has a smaller voting right in such an organisation, but spreading out financial shocks can be really unattractive for the younger generation. It doesn’t have to be, but the risk is there and in the new agreement that risk is not being rewarded.”

Actuary and owner of Edmond Halley Pension Management Jeroen Tuijp said that the biggest risks will lie with the employees, especially with those employees younger than 40 years.

He said: “Most members are fine with the unions deciding on how the contract is going to turn out and that all risks will lie with them, but if that’s the case, then they do want to be able to decide themselves where that money is being kept. So we need to rethink our current system where people can only join the pension fund for their sector.”

He added that this pension agreement would be impossible to explain to members, as there are too many possibilities and variations. “Currently you can compare coverage ratios, which are almost all based on the same principles. In the new agreement pension funds can make up their own plan, depending on what their fund and their members look like, and which investment strategy they have. There will be no way to compare pension funds anymore.”

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