July 23, 2024

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With the new retirement system, there’s a real chance everyone will feel deprived soon

With the new retirement system, there’s a real chance everyone will feel deprived soon

Carola Schouten, Minister for Poverty Policy, Participation and Pensions, in conversation with people at the public fair before the debate on the future pension law begins.Frick van den Berg statue / de Volkskrant

The new pension system is incomprehensible only to humans. Yes, the large retirement pot managed by pension funds is divided into all kinds of small individual pension funds, but it is difficult to predict exactly what that means for individual pensions.

With the new system, the Netherlands is replacing the pension system that has long been considered the best in the world. It has ensured for decades that the Dutch will keep a large portion of their income after retirement. For a long time there was enough money.

At the beginning of this century, scarcity resolved. Stock markets started behaving more volatile, so that returns were no longer guaranteed, especially when interest rates also fell afterwards. The ratio between the number of employees and the number of pensioners has decreased.

Because of the scarcity, pension fund subscribers suddenly bumped into each other. Many retirees felt that their pensions were being reduced too quickly, while many workers feared that the pensions would be so generous that they would eventually have so little left.

With the introduction of individual pots, this dispute will be settled once and for all. No one will have to worry that his or her premiums will end up in someone else’s pockets or that they will receive too little. A logical solution at first glance, which came after long negotiations between employees and employers, and therefore can count on broad support. It is difficult for deputies, especially deputies of the middle parties, to vote against it.

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However, at the end of this long process, it is good to answer the question of what exactly the Netherlands will get out of this. The most important change for the individual will be that the pension becomes more flexible and that it will adapt to the situation in the financial markets. This is a final farewell to perhaps the most important characteristic of the Dutch pension system: certainty.

This message has been softened by noting that individuals can allocate additional funds in the event of a setback. The closer a person is to retirement, the less flexibility is, so that the pension does not suddenly collapse at the last moment.

These mitigating measures cannot mask what is at the heart of the process. Retirement benefits will rise, but they will be paid with additional risk. Is the average pension fund member waiting for this? Or does he primarily want security, even if that means a slightly lower pension?

It is good to realize that no money will be added as a result of the system change. exactly the contrary. It is a complex and expensive process. So pension funds are likely to get poorer and so are their participants.

It is nice that the conflict between workers and pensioners is settled, but the question is whether the new system will not provoke many new conflicts. Single fate also opens the possibility for any individual to resume the division. Now that pension funds have a lot less cash on hand due to lower stock prices, there is a real chance that everyone will feel the shortness of the change.

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The new system also deposits another important feature of the Dutch pension system: solidarity. The idea that participants share benefits and burdens, as well as the idea that it is not a bad idea for someone else to get something more at the expense of yourself, because you are part of the same community. The effect of this will also be mitigated by additional measures, but this also cannot obscure the essence: in the future there will also be more unlucky and lucky people in the pension country, which is bad for the cohesion of a country.

Before the House of Representatives makes a decision on such a drastic, time-consuming and energy-intensive intervention, the effects must first be determined more precisely.

The newspaper’s position is expressed in the Volkskrant Commentaar. It was created after a discussion between commentators and the editor-in-chief.