After the 2002 general election the Christian Democrats (CDA) entered government as the leading element in the previous administration, the left-of-centre Labour Party (PvdA), went into opposition. However, the CDA’s coalition partners included two parties that had been in office with the PvdA since the first half of the 1990s, the free-market liberal People’s Party for Freedom and Democracy (VVD) and the small centrist Democrats-66 (D66).
But any who might have anticipated continuity in the pensions arena were in for a surprise.
The trigger for change was the equity market collapse earlier this decade, which coincided with the emergence of the CDA as the largest party in the Netherlands. And the driver for change has been Aart Jan de Geus, a CDA member and minister of social affairs and employment. Before entering politics, De Geus specialised in social security and pensions at the Christian Trade Union Federation (CNV) and on issues linked to the welfare state at consultancy Boer & Croon.
On his appointment to the ministry but before he knew what was waiting in his ministerial in-tray, De Geus wrote himself a memo. It said: “Pension funds are under pressure because of the unsatisfactory results of their equity portfolios after years of very positive performance. In the period of very positive results there were years when the equity performance enabled the funds to reduce premiums. Aging is growing continuously so a rise of premiums is inevitable. At the same time the Dutch system is under pressure from Europe while in our own country there is also criticism of the fiscal possibilities that our system offers. The influence of the elderly is not managed adequately. I am proud of our system but to stabilise it for the future this government has to come to a new national pension agreement, also with the social partners.”
Since then De Geus has set about addressing each of the issues.
The Dutch are used to transforming their environment – the building up of their country from land reclaimed and protected from the North Sea are a testament to their ability to turn visions into reality. And the so-called polder model, named after the reclaimed land and the co-operation required by the reclamation process, has bequeathed a tradition that agreement has to be reached through negotiation.
But a leading element of De Geus’ approach is the haste with which he intends to impose his reforms. Indeed, in a country less reserved than the Netherlands he would probably have picked up the sobriquet ‘bulldozer’ by now.
Among the initiatives De Geus has overseen, two stand out: a new Pensions Act due to be implemented at the beginning of 2007 and which will include a controversial new financial assessment framework (FTK), and the VPL Act, which came into effect at the beginning of this year and in effect removes the prospects for early retirement. It also introduces a life-course savings scheme, the Levensloop, intended to finance periods of unpaid leave during a working life.
“There are a lot of legislative changes as part of a broader economic reform agenda,” says Olaf Sleijpen of ABP’s financial and risk policy department. “Moreover, the previous pension law dated back to 1952, so one of the reasons why changes to pensions legislation were contemplated was to tidy it up, and that started before the collapse of the financial markets. The FTK is not a political issue in the sense that there is not much political debate about it.”
“I’m not sure yet whether the FTK proposals outlined in the pensions law are good, but it is not a matter of principle, it is a technical issue,” says Staf Depla, a PvdA parliamentarian with an interest in pensions. “The FTK is to ensure that the money is available because in the 1990s we did not do our job properly, we did not use the boom years to save money but instead we gave it to the sponsors, and then there were problems at the beginning of this decade. So we had to learn from the our mistakes and improve the FTK.”
So if there is general support for the changes De Geus has mapped out, why are they a cause of discord?
“The one question I ask every politician, the supervisors and the social partners is why, when you see we had a good system, with no problems in paying pensions and a really stable contribution level, do you think everything must change? ” says Peter Borgdorff, director of the Association of Industry-Wide Pension Funds (VB). “What gives you the feeling you have to act as quickly as you do? Because of our good second pillar funded system and good first pillar pension, we are able to have this discussion without the stress of having to make a reform tomorrow. We still have some years to reach a solution, we have the time, so take that time.”
“Why the hurry?” asks De Geus. “Because of changes in our labour market. Our economic position and our competitiveness are overestimated. We have to reform, we have to get people back into the labour market, we have to wake up after the years when we thought that everything went on by itself and that if you bought €100 abroad then 10 years later you could get €1,000 back and we thought that we were awake and Asia was sleeping. We really have to change. Wake up pension funds. We need a labour market and we need it now.”
“The government wants to introduce new regulations within a period of four years, and it not only wants to put them in place, it also wants to have results,” Borgdorff says. “I don’t think that we have statesmen – people who are able to have an overview of the coming 10 or 15 years.”
But De Geus is unrepentant. “We came to an agreement with the social partners and we asked for a very strong effort from the pension funds, especially in adapting to the idea of extending the working age to 65. Then we asked them to implement this in one year where normally it would take five-to-10 years. We are trying to make 2006 the year of transformation … I am aware that we have asked for the utmost, but not the impossible.”
However, there are suggestions that De Geus’ urgency has a further motivation. He wants the reforms in place by 1 January 2007 while the next general election will be in May 2007.
And he concedes the point: “If you are convinced that you have to reform, then four years is very short to take the necessary steps, but if you want to reform you have to pass the point of no return during one parliament. If you do not then there may be a new political constellation, a new debate and blah, blah, blah. So speed is very necessary.”
But is Borgdorff correct in his view that the Netherlands lacks statesmen, that the current crop of politicians, De Geus included, have an agenda but no vision? For many, the policy measure closest to the CDA’s vision is the Levensloop. “The Christian Democrats are advocating the Levensloop, which is very much focused on families,” says Loek Sibbing, chair of OPF, the association for corporate pension funds.
However, the original idea has been lost, says Jeroen Steenvoorden, director of pension fund for self-employed medical specialists SPMS. “During the discussions to establish the Levensloop it has somehow been changed from being a process that could allow for periodic sabbaticals throughout a working life to allow people to spend more time with their family, into an early retirement scheme. If we had taken more time we would have got a better idea of where we were going.”

Nevertheless, the CDA is seen as a traditional defender of the Dutch pensions system, with the opposition PvdA. But not so the CDA’s coalition partner, the liberal VVD.
“Our pensions system was created over the last 50 years or so as we rebuilt the Netherlands after the devastation of World War II,” recalls Borgdorff. “We did it in the typical Dutch way, working and co-operating together, and that fitted in with the views of the post-war governments and society when solidarity was something everybody wanted. But now we are a very wealthy country, the social and the political environment has changed and people want to talk about individual arrangements and security.”
“The Liberal Party is of this view,” says Sleijpen. “And that may play a role not only in how to look at pensions but also in how to look at society and how they think society should be reorganised. But although we understand the reasoning behind the views that propagate more individual solutions, our view is that a collective pension deal is preferable over individual solutions.”
Sibbing also recognises the trend and says it represents a problem. “It’s always nice to say that people should have a choice and individuality, but I think that a pension product is not suitable for individual choice,” he says. “It’s based on collectivity and solidarity, and if not, you should strip the system down and go to an insurance company. And while there may be good reasons to do that we have research that shows that if you go from DB to DC a pension will be 30% lower. And that’s also a choice.”
Does this VVD view not result in clashes within the government? After all while De Geus is a member of the CDA, his VVD cabinet colleague Gerrit Zalm holds the key post of finance minister. “The parties have different philosophies, the Liberals are more free market and Christian Democrats more social, and De Geus sometimes seems to make statements that show differences of opinion with Zalm,” says Alfred Kool, managing partner in Kool Corporate Communications. “This is not only on the pensions issue, it is a characteristic of the government and people are getting fed up with it. They complain that although the VVD is the smaller party it is dictating policy and that the CDA, which should be taking the lead, has lost the initiative. But then again the solutions that De Geus has forced though in the new pension law are measures that people don’t think are fitting with the Christian Democrats’ ideology but are more suitable to the Liberals.”

Indeed, there are suggestions that De Geus has outflanked Zalm on the right. “The Liberals ask whether we need all of those collective schemes but Zalm’s address to a Netspar workshop in January, when he said there was a downside to too much choice, came as a welcome surprise to many,” says Steenvoorden. “One can see that the finance ministry is attempting to gain influence in the pensions area. It increasingly sees pensions as an interesting area and it is hard to say who is driving policy.”
“De Geus has a line and it is very difficult to make him see that there might be other ways,” says Evert Jan Slootweg of the CNV, De Geus’ old employers and where he began his connection with pensions. “If he has his view then that must happen. Therefore, it is sometimes easier for us to deal with the Liberals because although they are ideologically hard they focus on the outcome. Zalm will say, for example, that he would like to see people getting out of the labour market at 63 rather than 60, but the how is not so important for him. For de Geus it’s more a case of ‘we must change the structure of things’. In that he is more a child of the 1970s; he feels you can restructure societies.”
It is a point that De Geus concedes: “I recognise that I am working more along the lines of some concepts and that Zalm is more pragmatic as a style. But more than Zalm I am fighting for a solid system and solutions that are sustainable.”
However, there is one issue where the two parties would not be able to paper over differences. “The Liberals claim that trade union representatives don’t have enough understanding of capital markets to be on pension fund boards,” says Slootweg.
“The finance ministry is very uneasy that trade unions have a big say in pension funds because they form such a major part of the collective bargaining process and control such a large amount of money with so much influence on the Dutch capital markets. So it says trade unions must go off the boards and pension funds should be governed more by large insurance companies.” “That would mark a paradigm shift from the position where pension funds are part of the collective bargaining process,” says Sibbing. “A pension is not a financial but a social product but the Liberals consider it is. We see pension funds as operating in the field of social affairs and an insurance policy or a bank account is a financial product.”
So would such a policy represent a threat to the polder model itself? “I am not pessimistic about the polder model because I believe it is in the genes of the Dutch,” says Slootweg. “We are used to bargaining and reaching solutions. But I believe that things are changing and not in a way that is favourable for trade union influence, and perhaps if they will have less influence that will change the way we deal with pensions.”
Depla does not think the system is in danger either.” The Liberals want to change not only details, but the whole collective arrangement,” he says. “But the Christian Democrats support the idea of collective pensions, so there is less political power for getting rid of the system.”
But will pensions be a factor in next year’s general election? “One thing that is sure is that pensions is now on the political agenda,” says Steenvoorden.
Sibbing agrees. “This year we, together with the VB, will actively lobby political parties by visiting them, asking their point of view and trying to help them write their political programmes. As recently as eight years ago you wouldn’t see anything about pensions in party programmes. At the last general election one occasionally saw two or three lines while some parties said nothing about pensions at all. But now parties are really doing research and taking a firm position towards pensions.”

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