NETHERLANDS -- The latest quarterly bulletin Netherlands Bureau for Economic Policy Analysis (CPB) warns that the pension sector is being confronted by a series of challenges arising from increased pressure on pension premiums and payments, labour participation, international competition and the government’s budgetary proposals.

The December 2004 issue of the bulletin says that fluctuating financial markets have had negative impact on pension funds’ overall financial position, which in turn has had a dramatic affect on their solvability position.

Fluctuating markets have also contributed to a move from end-salary to average-salary arrangement, combined with higher overall premiums and an end to earlier retirements.

Increased attention has been put on transparency and the so-called financial assessment framework (FTK). The CPB bulletin says that rational choices need to be made to support a functional pension system that does not have a negative impact on still fragile Dutch economic recovery.

It adds that social solidarity will remain a vital element of the pensions system due to a need to increase pension premiums further. But it says that intergenerational solidarity will come under increasing pressure due to ageing and individualistic tendencies within society.

The bulletin also highlights that, as Dutch pension premiums are tax-free, increased premium payments will mean that the government’s overall tax income will fall, leading to higher budget deficits, which will result in either higher taxes or lower government spending.