“The pension system was hard to maintain the way we have been doing it, with a zero interest rate. The system is simply not set up for that,” says Onno Steenbeek, Managing Director of Strategic Portfolio Advice at APG and professor at the Erasmus University of Rotterdam. In a new podcast with Jort Kelder he talks about the upcoming pension contract.
In the AXA IM Bootcamp podcast, broadcasted on September 1, 2020 Kelder asks several experts about the new pension contract. Besides Onno Steenbeek, Cees Harm van de Berg (Director of Investment at Willis Towers Watson) and Chris Iggo (Chief Investment Officer at AXA IM) were also asked to share their expertise.
“I noticed that Wouter Koolmees (Minister of Social affairs and Employment Opportunities, ed.) mentions that pensions may go up more often than that pensions may go down,” Jort Kelder comments in the first ten minutes of the podcast. Onno Steenbeek: “Realistically, that will probably be the case: it will go up more often than it will go down. But if you’re being honest, even in the last few years, pensions only went down substantially with a few pension funds. That is because pension funds were able to shelve the pain for later. It is not true that we are changing to a “casino pension” and that pensions will therefore be reduced. Many pension funds are in bad shape and that reduction will have to be incorporated into the new pensions. But this is true: We are now going into a system in which more of the risks are being put onto the participant.”
During the discussion, one of the things Onno commented on was the link between the contract and possible discounts. “If there is a pension discount in the future, it will be associated with the new pension contract. These discounts would have also come without this new agreement; they are inevitable. But there is a chance that this could be a false start for the new pension contract.”
Onno states that processing the new contract in the administration systems is a big job for pension administrators. But after that, the administration will become much easier: “Military operations are being set up at the administrative agency to get everything ready for that new reality. We would do well to stick to that period of 5 ½ years” (all pension funds must have switched over to the new system by January 1, 2026 ed.).
With these changes, can the Dutch pension system be considered one of the three best systems in the world? Onno: “Other countries are declaring us insane for making any changes at all. But the system was hard to maintain in the way we have been doing it, with a zero interest rate. The system is simply not set up for that.”
Asked about the pros and cons of the new pension contract: “We have entered into several agreements in politics in the past ten years, but ultimately it all turned out to be a bit vague. This new contract is more concrete, but it is just a speck on the horizon. What we need to talk about now is the transition to this new system, because there are a lot of questions that have not been answered yet.”
You can watch the recording of the AXA IM Bootcamp here.