In the column A phone call with... we have a conversation with an expert about a current event related to economy, (responsible) investment, pension and income. This time: head of International Public Affairs Johan Barnard, on the significance of the European elections with respect to our pensions.
The European Parliament elections are coming up on June 6, 2024. As the Future of Pensions Act (Wtp) went into effect on July 1, 2023, the question now is: how significant are the European elections to the Dutch pension system now?
It is basically up to each EU member how they design their pension system. So, developments in Brussels are not relevant to our system at all?
“Yes, they still are, through various avenues. For example, there is a European directive on the operations and supervision of institutions for company pensions. Such a directive is binding and is converted into national laws by member states. In our case the Pensions Act. This so-called ‘IORP II Directive’ is now in an evaluation process, which will most likely be followed by a revision proposal to be issued in late 2025 or early 2026. Possible topics here include cross-border pensions, the amount of information to be included in a Uniform Pension Statement (UPO), the extent to which pension funds are obliged to take sustainability into account in their investment policy, diversity and inclusion policies, and the pension gap between men and women. These topics are not decisive for the Wtp, but they are important.
Another likely review proposal concerns the so-called PEPP regulation, which defines a European third pillar product. Some argue that this product - which has not been very successful so far - should also be allowed as company pension provision.”
Are there any other developments occurring at the EU level that affect our pensions?
“Regulation of the investment world is done largely at the European level and the same applies to most of the legal rules for SRI. In the latter regard, a lot has been achieved in the last five years. For biodiversity, however, we narrowly failed to bring about the European ‘Nature Restoration Act’ before the European elections - partly due to a Dutch dissenting vote, based on a motion from the House of Representatives.
More broadly, the European Commission and a range of key experts point out that the capital market functions better in the minority of member states where there is a good asset-funded pension system, such as Sweden, the Netherlands and Denmark. Part of the answer to the question of how to create a truly European capital market involves pension and saving products.
Finally, in the so-called European Pillar of Social Rights, the European Union has also made a political promise on income for the elderly and pensions. This states that employees and the self-employed are entitled to a pension at retirement that is commensurate with their contributions and constitutes an adequate income. The pledge also states that women and men should have equal opportunities to acquire pension rights and that Everyone in old age is entitled to resources that enable a life of dignity.”
How solid is this political promise?
“Admittedly, this is a non-binding declaration and it is largely up to the member states to bring it about, but it does justify the fact that pensions can also be discussed in the monitoring of the macroeconomic policies of the member states by the European institutions - especially the Commission and the Council of Ministers. In several consecutive years, for example, the Netherlands received an annual recommendation to reform second-pillar pensions, which took shape in the Wtp. The - outgoing - government had also included the Wtp as a reform in the national post-Covid reform program, for which the Netherlands will, in principle, receive about €5 billion in European subsidies. Several European countries have also seen renewed interest in funded and supplementary pensions, including Germany, Italy, Spain and Ireland.”
In any case, it is important for Dutch pension funds that the Netherlands and its MEPs play a constructive role in European discussions on pensions. For that reason alone, your vote on June 6 matters.”