'There are compelling arguments for the new pension system'

Published on: 16 May 2024

Three questions for Fieke van der Lecq, professor of Pension Markets at Vrije Universiteit Amsterdam and government commissioner for the pension transition as of January 1, 2024.

As a Crown-appointed SER-member, you were involved in the new pension schemes design, which formed the basis for the new system. Are you pleased with the result?

“I am pleased to see the abolition of the average pension contribution system. Young people pay too much relatively speaking for their pension accrual in the current system. That will end: pensions will be higher now that the funds will be able to invest the contributions for longer. The young benefit from this, which is important too in ensuring their support for the system. A lot of complexity has crept into the new schemes. But there are still good arguments for why they are needed. Broadly speaking, we now have two schemes for the funds to choose from: the solidarity defined contribution scheme and the flexible defined contribution scheme. I hope the two schemes will converge over time to make the situation even more clear-cut.”

You hold the chair in Pension Markets. Do you see the playing field changing?

“The pension funds have other things to worry about at the moment. But I expect to see further consolidation: funds will continue to merge. We once had over 1,000 pension funds; now there are only about 150. Economies of scale are really important. It doesn’t much matter whether you write a computer program for 10 participants or 10,000, so you should go for 10,000, as that is cheaper per person. The new system will encourage this development because there will be just the two standard models for the schemes. In addition, being on the board of a pension fund has become increasingly difficult, and there are fewer and fewer people willing and able to take on that job. There are more rules and it has become more technical. Fund directors need more professional know-how. That too is a factor spurring fund mergers. The smaller pension funds in particular will eventually decide they are stronger together.”

What will you be doing as government commissioner?

“I will be advising the Minister for Poverty Policy, Participation, and Pensions on progress in the transition to the new pension system. I will be talking to different parties in the sector — not just the pension funds and insurers, but also the administrators, social partners, and regulatory authorities, among others. I will be monitoring whether the transition process goes smoothly and sufficiently quickly. Do we see a group lagging behind, and if so, do they need help or a prod in the right direction? The website werkenaanonspensioen.nl offers support with the transition: Pension professionals can use it to obtain information and assistance. We may encounter problems at some point that can be addressed in a sector-wide approach.”