“The new system can restore confidence”

Published on: 17 May 2023

All eyes will be on the renewed pension system in 2023 as well. How are we doing in the run-up to that transition? And what challenges will the transition entail for the coming years? In a series of interviews, which appeared earlier in the APG annual report, several experts – from inside and outside APG – pondered these questions. In this episode: Kim Putters, chair of the Social and Economic Council (acronym in Dutch: SER) and Professor of Broad Prosperity at Tilburg University

The level of confidence in institutions is low. And it is precisely during system reform that confidence is needed, right?

“It was uncertainty about social and financial sustainability that prompted the Dutch government to ask the SER in 2014 for advice on the future of the pension system. It was during meetings of the SER that it became clear that many participants did not understand how investment returns are distributed under the current system. That eroded confidence. A successful introduction will help restore that confidence, as will a well-balanced elaboration of the revamped system across generations. That way, all participants will recognize that the system has added value for them.”

Still, there is a lot of debate about the introduction of the renewed system.

“There are substantial impacts, costs, and risks associated with the transition. The social partners and the government are jointly responsible for how to compensate for the abolition of the uniform policy pension system (with contribution rates and accrual rates uniform across all ages). It is important that the transition to the new system with age-independent contributions be balanced and cost-neutral. The pension accrual of affected employees should be adequately compensated. An effective transition to the new system will require a huge effort from social partners, pension providers, and the government.”

How do you see the future of the Dutch consensus-oriented model and the matter of representation within the social partners’ constituencies?

“In my view, there is no alternative but to seek well-supported, consensus-based solutions, especially in these times of polarization and political fragmentation. There are a few crucial preconditions. First of all, the SER must base its reasoning consistently on the standpoint of people. If you do not delve sufficiently into what is happening on the ground, real solutions will fail to materialize. We also need to consider a compact, coherent agenda. We will be expected to connect the short-term with the medium and longer-term prospects for our country. These prospects involve major environmental, economic, and social transitions that will require systemic changes to everything from sustainability and the circular economy to fighting inequality in education, creating an inclusive labor market, and digitalization. We want to steer these changes in an inclusive and sustainable direction. A broad base of support helps give multiperspectivity and diversity a strong foothold. And that is why, for example, we are strengthening the position of the self-employed within our Council.”