As the pension transition accelerates, the outlines of the renewed system are becoming increasingly clear. Recent overviews of transitions per pension fund reveal one striking pattern: the sector is moving en masse toward the Solidarity Contribution Scheme (SPR). The Flexible Contribution Scheme (FPR) forms a smaller, yet clearly recognizable niche. These choices show how the balance between solidarity and individual freedom of choice is being shaped within the new system.
The overviews show that social partners in virtually all major industry sectors are opting for the solidarity contribution scheme. ABP, bpfBOUW, PFZW, PMT, PME and many other funds have now definitively accepted this assignment from the social partners. A similar pattern appears among the occupational pension funds, although some smaller funds are switching to a flexible contribution scheme with a risk‑sharing reserve.
Among company pension funds, the picture is more nuanced, but even there the preference of the social partners for the solidarity variant predominates. Only within general pension funds is the distribution broader; flexible contribution schemes are also chosen there, often in situations where DC elements were already used previously.
Why the SPR is so attractive
That the vast majority of social partners choose the solidarity contribution scheme is no surprise. From the outset, the trade union movement has expressed a clear preference for the SPR. A key reason is that in the SPR, the premium level, agreed upon by the social partners, must be derived from a pension objective. In at least half of the economic scenarios, this is, for example, 75% average salary after forty years of service. Because the premium in the SPR is linked to the likelihood of achieving a particular pension ambition, this also means that the premium level can remain a topic of negotiation, for instance when that ambition is at risk of no longer being met.
In addition, the SPR offers a more extensive form of risk‑sharing between generations. The scheme also provides more room for younger participants to take investment risk, as the borrowing restriction can be lifted. Moreover, there is more capacity for investments in illiquid assets. This is possible because investments in the SPR take place at the collective fund level and participants remain within the fund upon retirement. According to the Pension Federation, the SPR therefore retains several familiar principles from the old FTK framework. Due to its pension objective and broader risk‑sharing, this scheme lies closer to the previous FTK contract than the FPR. For many large and mandatory industry pension funds, with broad and diverse populations in which generations succeed each other over long periods, this aligns well with their social foundation, the umbrella organization notes.
Why the FPR Is chosen and by whom
The flexible contribution scheme clearly follows a different approach. Participants have more influence over the investment policy. Within the FPR, funds may offer multiple lifecycles or even allow full investment freedom. The options are also broader in the benefit phase: participants can choose between a fixed or variable pension benefit. According to experts, this explains why the FPR is more common among company pension funds. These funds typically have a more uniform participant base, sometimes with higher financial awareness or a history in which DC elements were already common. The freedom of choice fits better with such groups.
Employers may also prefer the FPR because it can offer more stable premiums. Without a pension objective, there is less pressure to raise the premium. In addition, the FPR is particularly attractive in cases of short employment tenures. During the accumulation phase, these participants can choose a value transfer without leaving behind a contribution to the risk‑sharing reserve, as this reserve is usually only filled at retirement from personal capital rather than from premium contributions. Or, alternatively, there may be no risk‑sharing reserve in the FPR at all. Only mandatory industry funds are required to include such a reserve. Another factor plays a role for smaller company pension funds: these participants change jobs more frequently and thus transfer to another fund sooner. This fits well with an FPR structure without collective reserves, in which built‑up capital can be transferred more easily.
Reserves: a crucial distinction
A key technical difference between the two contract types lies in how reserves are funded. In the SPR, the solidarity reserve may also be funded from excess returns. In the FPR, funding from returns is not permitted; the risk‑sharing reserve is generally funded only at retirement from personal capital. Funding from premiums occurs relatively infrequently. The SPR therefore offers more scope for intergenerational risk‑sharing, one of the important reasons for the trade union movement’s preference.
For mandatory industry pension funds, a risk‑sharing reserve is required in the FPR. Other funds have more flexibility in this regard.
A critical phase: implementation and communication
As more funds complete their decision‑making, the focus shifts toward execution and participant communication. Pensions are becoming more personal and transparent, while still retaining their collective core. For most people, less will change than they might think: pensions remain an arrangement based on collectivity, solidarity and lifelong benefits.
The fact that social partners are moving so decisively toward the solidarity contribution scheme shows that this core remains strong. At the same time, the flexible contribution scheme provides room for customization where possible. The renewed system is therefore not a break from the past, but rather a modernization, one in which familiar principles and greater individual insight come together.
This article is based on input from the Pension Federation and internal experts at APG.