Next year, the rules for a new, future-proof pension system are expected to take effect. But in the meantime, much work remains to be done. Where do we stand? And what’s in store for the next eight months? Tinka den Arend, strategic policy officer at APG, takes us through the process that will culminate in a future-proof pension system on January 1, 2023.
Where are we, on the road to the new system in 2023?
“Carola Schouten - the Minister for Poverty Policy, Participation and Pensions - submitted the Future Pensions Bill to the House of Representatives on March 30, 2022. This bill forms the basis for the new system in broad lines. Last year, a draft of the bill was already known. This draft has now been amended on the basis of 800 reactions during a public consultation, tests by advisory bodies and the advice of the Council of State. Now that the bill has been submitted to the House of Representatives, the next item is the Social Affairs and Employment Committee. This will be followed by the plenary debate.
The Commission first organized two roundtable discussions, in which it collected the opinions of experts and interest groups. The first discussion, with 18 experts, took place on April 22. The roundtable with the interest groups was held on May 10.”
What kind of experts and interest groups should we think of?
“They are mostly scientists, such as Kees Goudswaard (professor of economics and endowed professor of social security at Leiden University, ed.), Casper van Ewijk (professor of macroeconomics at the University of Amsterdam, ed.) and Bas Werker (professor of econometrics and finance at Tilburg University, ed.). But people from the field are also participating, such as Agnes Joseph, an actuary at Achmea. The interest groups include employers’ associations such as VNO-NCW, trade unions - CNV, FNV - and senior citizens’ associations such as KBO Brabant.”
How does such a roundtable discussion work?
“Each participant has submitted a position paper in advance, outlining their views in a concise manner. During the roundtable discussion, each participant is given a few minutes to explain and defend these positions. This is followed by a conversation between members of parliament and participants, in which members of parliament can ask further questions.”
How do participants know if the House committee is doing anything with their input?
“They don’t know that right away. But if you look at the parliamentary questions about the submitted Future of Pensions Act to the cabinet after the April 22 meeting, you can see a lot of the input from experts in it.”
Can you give an example of input that we have seen reflected in Parliamentary questions?
“An important example is the input from Casper van Ewijk, Bas Werker, Theo Nijman, WTW and Ortec on the entry method. During the entry process, pension entitlements accrued under the old pension system are converted into pension entitlements under the new system. In this case it means that the collective assets of a pension fund are converted into personal pension assets for participants. The Future of Pensions Act offers a choice between two methods for this: the VB-ALM method and the standard method. The experts rightly note that the VB-ALM method is not useful for this purpose. Because when using this method, you have to make arbitrary assumptions. By definition, these therefore become open to discussion. And since the outcome of the VB-ALM method is very sensitive to those assumptions, there is a good chance that legal disputes will arise. In any case, it is not advisable to use two methods.”
“By definition, one method will work out better for one group and another method for another group. After all, if a fund chooses the standard method, for example, there are always participants who will wonder how much their pension entitlements would have been when using the VB-ALM method. It is more advisable for each fund to use the same entry method. And the standard method is the most suitable for this, partly because it is easier to implement and the results are easier to explain to participants and other stakeholders. This method does, however, require more leeway to be able to compensate for disproportionately negative effects.”
Are there any other examples of such input?
“The Dutch Pension Federation and the Association of Insurers have drawn attention to the feasibility of the new rules for survivor’s pensions. In order to be able to guide participants in their choices at the right time, pension administrators need information from the UWV. This will prevent participants from falling between the cracks, for example after a period of unemployment. This point of attention was also adopted by many members of Parliament in their questions to the minister.”
When will we know the extent to which the bill will be amended?
“We will probably know this by July 2022. More will gradually be known about the content of the possible changes in the near future. The written questions submitted to the minister on April 26 run to 108 pages. A number of them, including the questions about the VB-ALM method and data exchange, are being asked by many groups. There could be some changes in the bill on those points, but whether that happens remains to be seen. The Cabinet can still modify the bill with amendment bills and the House of Representatives can also amend the bill itself. If the bill is adopted by the House of Representatives, the legislative text will then be fixed and the bill will go to the Senate. The Senate can adopt or reject the bill, but can no longer amend it.
In addition, there will probably also be changes to the secondary legislation, which will flesh out the bill in more detail. Consultation has also taken place in this regard, which has resulted in 44 responses. We expect clarity about the final secondary legislation no later than January 1, 2023.”
Will that date of January 1, 2023 be met?
“The government seems to be pulling out all the stops to meet this date, but at the same time you can see that the House of Representatives attaches importance to a thorough debate. So far, the one does not exclude the other, but this requires a lot of effort from both parties. From APG’s perspective, we have an interest in both timely and careful consideration. From our perspective, enforceability and explainability are particularly essential. It will be interesting to see whether the choices that are made contribute to feasibility and explicability.”