The Netherlands should focus on ensuring that its second pillar pension system is more transparent, inter-generationally fairer and more resilient to shocks, according to the European Commission (EC).

Publishing its country specific recommendations for the Netherlands, the EC noted that while the pension system performs well on pension adequacy and fiscal sustainability, it has drawbacks in terms of intergenerational fairness, transparency of pension rights and flexibility.

The report noted: “Occupational pension contributions are high and fluctuate depending on how pension funds perform. As such it may affect household spending in a pro-cyclical way. A reform of the pension system could, over the life cycle, lead to lower compulsory pension contributions and more stable consumption (or ‘consumption smoothing’).

“The government has the intention to substantially reform the second pension pillar in order to improve coverage and create a more transparent, more flexible and actuarially fairer system. A simultaneous reform of housing market institutions and the pension system has the potential to shorten household balance sheets, and make the household sector less vulnerable to financial and economic shocks with beneficial effects for macro-economic resilience and economic growth.”

The EC said that reforming the second pillar of the pension system would not only make it more transparent and inter-generationally fairer, but it would also be more resilient to shocks, support domestic demand and help to rebalance the euro area.

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