Netspar is now doing research on that risk appetite?
“A study is underway with APG at the pension fund for the construction industry. We are investigating whether we can make risk measurement more attractive by converting a boring scientific survey into a serious game. We’ll compare the results with those of a regular survey using three different measurement methods.”
Can you say anything yet about the outcomes?
“We have just shared the first results with the bpfBOUW board. We see the same patterns across the different survey methods for the difference in risk appetite by age, by high and low incomes, and by background - whether they are employees in the workshop or in the office. But the level of risk appetite does differ by method. That, too, raises questions: how should we deal with that?”
But the participants were willing to take risks anyway?
“Yes. Look, if you ask people on the street, they would say: preferably as much security as possible. They don’t like financial uncertainty. They prefer to opt for a fixed rather than a variable payment. Even if that rationale doesn’t necessarily give them the best results.
We have also conducted research into this: for most people, it really is better to take some risk. That increases the chance of a higher payout. Because security is expensive.”
The younger you are, the greater the risk appetite?
“That is indeed confirmed in our studies. We also see that in the international literature.”
But ultimately, fund directors make the choice.
“They determine how they are going to interpret their investment policy. They can make use of our research results in making that choice. Moreover, it is a good thing that participants’ risk appetites are measured every five years. You can’t just ignore the results. It is also an instant communication opportunity. If you explain the balance between risk and return in an accessible way, it can create mutual understanding. Incidentally, we see from the surveys that the composition of the board - how many men, women, young people, older people - also affects how much risk is taken.”
So, if there are three female thirty-somethings on the board...
“... you have a different outcome than if it were three men in their fifties. And that’s actually kind of insane, because you want the risk appetite to depend on the composition of a fund.”
Netspar also examines the risk capacity of participants?
“Yes, it does. The great thing is that Statistics Netherlands has a lot of data on the assets that people have, their second-pillar pension entitlements with various funds or insurers, their savings and real estate assets. This enables us to gain insight into the overall picture at an individual level - anonymously, of course. And what that looks like, for example, by sector, age and income bracket. The various sectors will also be able to use the research results in their choices later on.”
Unfortunately, some sectors will continue to be left out of the pension equation even in the new system.
“Yes, the self-employed for example. Particularly among middle-income earners, little pension is accrued. People with flexible contracts and employees in small companies, the SMEs, also accrue relatively little if anything at all.”
What do Netspar studies tell us about that?
“That one of the barriers again is a low level of knowledge about pensions. They don’t really know how it works. Only 50 percent of self-employed people are aware that there is a fiscal annual margin, several surveys show. You can save for a pension in a tax-friendly way, but many people don’t know about it or think it’s too complicated. On top of that, self-employed people more often have a variable income. They do want to save, but not in a pension product where they can no longer access their money if things go badly one year. That’s a difficult hurdle to overcome. After all, you don’t want people to be able to just take it out: then there will be no pension left later in life.”
You yourself have two part-time jobs: you are director of Netspar and professor of empirical microeconomics at Leiden University. What drives you?
“What drives me is a better old age for the Netherlands. That is also Netspar’s mission. It is important to gather both knowledge and know-how - people from science and practice in various disciplines - who will work together to achieve that mission. We obtain knowledge through research projects that are prioritized by Netspar’s partners. We share that information with various target groups, on three levels: quick up-to-date, practical application and in-depth knowledge. Quick up-to-date, for example, is just one page with the most important conclusions and policy indications. Or a low-threshold podcast.”
Is this being gratefully used?
“APG is one of our partners, and we work closely with several APG departments that do research themselves. But it seems to me, with other partners too, that we can reach even more employees with our research results. Because the insights are useful and relevant to everyone. That’s why we try to distribute our knowledge in the most accessible way possible. For example, through websites, social media, newsletters and so on.”
And network development is Netspar’s second goal?
“That is very important. Various stakeholders are involved in our network: pension funds, insurers, social partners, regulators, scientists, the government. We try to expand that network as much as possible. After all, all these types of organizations have their own role to play in pensions. We hear from each other what’s going on and tackle things together. And we share our knowledge. Before I was the director of Netspar, I did my own research: what exactly are the pension issues and are the research results relevant for practice, what is needed? As director, I can do that a bit more broadly, by connecting people with each other.”
In short: sharing and connecting; that’s your mission?
“Well, I also like to surprise people positively with science. Recently I gave a presentation and afterwards someone said to me, ‘Wow, I thought: Netspar, that’s probably going to be very difficult.’ But it was very interesting and relevant. And I got new ideas.’ That aha moment people have, when they understand the world a little better, and that this makes them feel good, that makes me happy. That is also what drives me.”