After many years, a pension agreement finally is in sight. However, the picture is not yet complete; there is clarity about the changes to the pensionable age and the exit options for the arduous occupations, but much remains to be settled as regards to the implementation of the second pillar.
There is still a lot of work to be done, because the details of the contract and the transition have yet to be finalized. It is still to early for what APG would like to do - informing participants, on behalf of the funds, about the consequences of the agreement for their pensions; let alone to implement the agreement. For the second pillar, the agreements therefore are a step in the right direction, but not yet enough so to provide participants with the clarity they are expecting and are entitled to. However, the advantage for them is that a collective contract is still possible, which allows for a higher pension. There will be more room - albeit limited - for freedom of choice.
Key aspects of the pension agreement:
What is APG’s view?
We asked Gerard van Olphen:
What do you think of this agreement?
Gerard: “In the end, only one question is really relevant: How does the agreement affect the participants? Viewed from that perspective, the picture is concrete and positive for pensionable age and arduous occupations. The fact that pension savings will continue to be based on a collective approach is also in the interest of the participants, because this will ultimately result in a higher pension. But it is still too early to assess the effects of the new contract and how well-balanced the transition will be. There are still quite a few open ends that need to be resolved under the leadership of a steering group consisting of government and social partners. I would like to see a lot more clarity here, in view of the millions of participants who are in a state of uncertainty and would like to know where they stand.”
What does this mean in terms of potential pension cuts?
“As far as the short term is concerned, it is a gain that no reductions will be necessary in the event of a coverage ratio above 100%, as this is extremely difficult to explain to participants. The downside is that with the current funding ratios, it may well be necessary to cut when the funding ratio are below 100%. This means that cuts are not off the table. In any case, the fact there are no pension cuts above that 100% mark, makes a big difference.”
What does the agreement mean for the idea of individual pension accrual?
“In part through experiments at APG on providing overview and insight, the social partners have been persuaded that you do not need individual pension accrual to give the participant the necessary insight into how much has been accrued for him or her within the collective assets. Individual accrual would mean a lower pension outcome for participants. And that’s not necessary, as long as you show the participants how much has been saved for them and help them gain overview and insight into the process. In addition, the agreement allows for pension saving by self-employed persons in the second pillar. This possibility gives pension fund bpfBOUW for example, more opportunities to offer a good pension to all workers in the construction sector.”
Details of the contract and the transition have yet to be finalized. What is still to be done? “The agreement in principle is particularly clear where the state pension (AOW) is concerned. It might prove to be more of a state pension age agreement than a pension agreement. As far as the second pillar is concerned, a first step has been taken but a lot of work still needs to be done. This work has now been delegated to a steering group of social partners and members of the Dutch government. They will still have to answer important questions about the form of the new pension contract and a well-balanced transition. The Dutch Labor Foundation (STAR) still has to answer important questions; about the form of the dependents’ pension.”
So we still have a way to go?
“Of course. It is still not clear what the final agreement will look like. But it is a first step in the right direction.”