Finalising the details of the Netherlands’ planned pension reforms will likely require more time than the scheduled completion date in 2020, according to delegates at pensions industry publication Pensioen Pro’s annual conference.

After an agreement was struck earlier this month on changes to the state pension age and early retirement rules, a separate steering group has been set up to flesh out more details of how the second pillar will work, including a transition to degressive pensions accrual.

However, 84% of attendees at the Pensioen Pro conference last week said they expected that the steering group – made up of social partners and the government – wouldn’t finish its work by the deadline of 2020-end, set by the government.

Hedda Renooij, pensions secretary at employer organisation VNO-NCW, said she understood the scepticism “as concluding the accord had taken a long time”. However, she described the fact that the direction was now clear as “a positive thing”.

Paul Frentrop, senator for the new right-wing party Forum for Democracy (FvD), claimed that the social partners no longer had an incentive for meeting the deadline after securing their goal on the state pension age.

Benne van Popta, chairman of the €77bn metal sector scheme PMT, highlighted the need for quick progress, arguing that a drawn-out reform process would distract pension funds from other urgent subjects, including avoiding rights cuts.

Ruud Stegers, trustee at trade union VCP, noted that replacing the current average pensions accrual with a degressive approach would be the greatest challenge in finalising the pensions agreement. He argued that many large pension funds lacked the financial resources to compensate older participants who would be negatively affected by the change.

Stegers added that pension fund reserves would also decrease through the introduction of a lower ultimate forward rate (UFR), as part of the discount rate for liabilities.

According to Eline Lundgren, trustee at the €19bn agriculture scheme BPL, the new UFR would cost the scheme 5% of its capital buffers. She added that the negative effect on the financial reserves of ING’s and NN’s pension funds would be 9%.

Impact of discount rate, return assumptions

Also at Pro’s conference, Casper van Ewijk, director of Dutch pensions think-tank Netspar, argued that many pension funds faced a three-fold transition process, as they also had to adopt a contribution schedule capable of covering all costs, in the wake of the pensions agreement.

Van Ewijk said lower interest rates – caused by a new UFR and market developments – would complicate a transition to degressive pensions accrual as pension reserves also fell.

Although a 63% majority of conference delegates said that a new pensions contract would require fresh review of the UFR and return assumptions, Van Ewijk insisted that adopting the discount rate set by European supervisor EIOPA was “at odds with all scientific views”.

In his opinion, only the introduction of a different approach to formulating pension entitlements would lead to a substantially different discount rate. The Netspar director, who was a member of the Dijsselbloem committee which recently advised on both issues, said it was difficult to imagine that a new committee would come up with different recommendations for return parameters.

“The committee’s advice for reducing parameters has been received reasonably well by the pensions sectors,” he argued, adding that the market’s view was that future returns would decrease.

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