Academic, Hans van Meerten, weighs in on the debate around the Dutch pension reform

In a recent interview with a Dutch publication, the newly appointed PensionsEurope chair, Jacques Van Dijken, described the Dutch pension reform as a "best practice" admired by other countries.

However, this claim prompts critical questions: Which countries are these, and what specifically do they admire about the reform? A closer examination reveals significant concerns about the reform’s implications for participants.

The Dutch pension reform marks a major transition from a defined benefit (DB) system to a defined contribution (DC) system. Under this new framework, already accrued pension rights are converted into individual pension pots, effectively transferring the investment and longevity risk to participants.

While the reform is promoted as more flexible and sustainable for the future, it also introduces considerable risks.

This supposed international admiration raises doubts: Do these countries fully grasp the complexities of the Dutch reform? Are they aware of its controversial aspects? Several key concerns merit attention.

Firstly, the reform fundamentally alters previously accrued pension rights, converting them into a new legal framework without explicit participant consent. This raises serious legal and ethical concerns regarding the protection of these rights.

Secondly, participants have minimal influence over this transition. Despite the profound impact on their financial futures, they are excluded from directly shaping the process.

Thirdly, the transition to the new system has been accompanied by escalating complexity and costs, which appear to increase almost daily. This trend has sparked further debate about the adequacy of the planning and financial forecasting associated with the reform. Critics argue that such issues should have been addressed during the development phase to ensure a smoother and fairer rollout.

Participation in a pension fund remains mandatory in the Netherlands. Dissatisfied participants cannot opt out of their funds, further fuelling criticism of the lack of choice within the system.

The uncertainty surrounding the legal protection of participants during and after the transition may lead to questions about whether the reform can withstand legal scrutiny, both domestically and internationally.

Last but not least, the fact that most politicians are excluded from the newly implemented system has raised significant concerns. This exclusion, described by critics as a structural flaw, undermines the principle of inclusivity that was initially promised. Prior to implementation, assurances were given that all participants would benefit equally under the new framework. However, this exemption for politicians creates a perception of unequal treatment and erodes trust in the process.

Addressing these challenges promptly will be essential to maintaining public confidence and achieving the intended benefits of the reform.

While PensionsEurope claims that some countries admire the reform, foreign experts that I speak to, and who are familiar with its details, often express contrasting views.

They highlight concerns about the legality of the changes, the exclusion of participants from the decision-making process, and the retroactive conversion of rights. The mandatory nature of the system and potential conflicts with international standards are also frequently criticised.

Although the Dutch pension reform has garnered international attention, it is essential to look beyond superficial praise. The reform raises fundamental issues. For the Netherlands to genuinely serve as a "best practice," it must address these challenges and controversies with transparency. Only by doing so can the reform be rightfully celebrated as a model for other nations to follow.

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