Netherlands – 2019 round-up and outlook for 2020
Isabel Coles | 12 February 2020
The Dutch pensions market saw a number of developments in the course of 2019 with more expected in 2020.
In June 2019, the Dutch government and social partners reached agreement on a new pensions system, which will include changing the fiscal framework so that pension accrual will no longer vary by age. This effectively means a change to flat contribution rates for defined contribution plans and age-related accrual rates for defined benefit plans from 2022.
Many elements of the new regime have yet to be agreed. A steering group consisting of representatives from the government and social partners is considering these areas, including the conversion of pension entitlements accumulated under the current system, compensation arrangements where individuals will accrue lower benefits under the new structures, and the legislation to implement the new system. The steering group is expected to announce its recommendations during 2020.
Consolidation in the pensions market
The number of company pension funds in the Netherlands fell from 160 to 148 over 2019 according to De Nederlandsche Bank, which supervises pension funds. Further consolidation amongst pension funds and pension providers is expected in 2020, as larger funds seek to simplify and harmonise their administration arrangements, and smaller funds to continue to move to industry-wide plans (where possible), insured plans or APFs (Algemeen pensioenfonds).
Sustainable investment is an area of focus for Dutch pension funds, supported by asset managers introducing ESG investment funds (including passive funds) and developing benchmarks to help monitor their performance. This trend is set to continue in 2020 as pension funds consider their ESG (Environmental, Social and Governance) criteria, and update their investment policies and risk monitoring frameworks accordingly.
Communicating pension benefits
From 2019 pension administrators are required to provide plan members with pension projections in line with the “Uniform Calculation Method” (Uniforme Rekenmethodiek or URM). With the projections loaded into mijnpensioenoverzicht.nl (an online system where individuals can find details of all their pension entitlements), plan members now have access to illustrations of their expected future pension benefits from all sources on three scenarios.
Milliman’s Rajish Sagoenie and Martin Wouda comment on the events of 2019 and outline their thoughts on the trends and developments for 2020 in a special pensions bulletin (in Dutch).