The Dutch Social and Economic Council (SER) has failed to produce a unanimous recommendation on the best way forward to building a new and sustainable pensions system in the Netherlands.

The SER said individual pensions accrual, combined with collective risk-sharing, would be an “interesting” option for future pension arrangements.

Dutch unions, however, have said they want to explore the concept of an improved version of the current defined benefit (DB) plan but with fewer guarantees.

Gijs van Dijk, a board member at the FNV union, said: “For pension funds with low coverage ratios, this alternative will probably also allow for a more simple transition to a new system.”

Meanwhile, Cees Oudshoorn, director of employer organisation VNO-NCW, said his members wanted a choice for “modern” defined contribution arrangements.

In its report, the SER concluded that, in a system based on individual accrual and collective risk-sharing, the loss of purchasing power would be less than under current DB arrangements with ‘degressive’ accrual.

In a bad-weather scenario, however, it would be worse, it conceded.

The SER said its analysis had shown that the negative effect of abolishing an average contribution for various demographics could be offset by simultaneously introducing a new pensions system aimed at building up financial reserves more slowly.

The advisory body, however, had no answer as to how to deal with funding shortfalls arising during the transition from the predominantly DB system to new arrangements.

It said more research was needed on how best to protect pensioners without burdening active participants and future generations.

Previously, Kees Goudswaard, chairman of the SER committee, offered as possible solutions the smoothing out of any discounts and waiting until pension funds’ coverage ratios stood at 100%.

Klaas Knot, meanwhile, president of supervisor DNB, pointed to the urgency of implementing a new pensions system, “as shortfalls at pension funds could increase further”.

He recently urged pension funds to begin mapping out their participants’ risk preferences, assessing which pensions contracts would match this and deciding how to carry out any transition to a new system.

Knot advised against simply waiting for interest rates to be raised again.

“The current system has structural flaws that won’t be corrected by hoping for a rate increase,” he said.

In other news, Jetta Klijnsma, state secretary for Social Affairs, said struggling pension funds would be prohibited from delaying necessary rights discount until a new pensions contract had been established.

In a letter to Parliament, she argued that the new pensions arrangements were still unclear.

“Moreover, funding ratios could deteriorate further and hamper a transition to a new system,” she added.

A recent DNB survey concluded that, if pension funds’ financial position failed to improve by the end of this year, 27 schemes with 1.8m participants would have to implement a rights discount of 0.5 percentage points on average.

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