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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
Making the Dutch Pension System Less Vulnerable to Financial Crises
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- Jens Høj1
- Author Affiliations
- 1: OECD, France
- 17 Jan 2011
- Bibliographic information
The Dutch occupational pension system has been successful in securing high asset accumulation to fund generous pension promises. However, for the second time in this decade the pension system has been affected by a financial crisis and many pension funds’ assets fell below levels needed to meet regulatory requirements. Insufficient funding raises solvency issues, which could eventually lead to large fiscal costs in case of bail-outs. In response to the crisis, most funds were required by the regulator to draw up recovery plans to restore their funding over five years. This has raised concerns that the adjustment required by the regulator is unnecessarily sharp, with possibly adverse macroeconomic implications. On the other hand, OECD simulations indicate that under current policies, it is unlikely that funding rates will be secured that enable the funds over the long term to fulfil their promises of a replacement rate of up to 80% of average wages. This raises the challenge of implementing parametric changes that secure pension benefits without large detrimental effects on intergenerational equity and growth. Occupational pensions are transferable, which enhances labour market mobility. But it is often very difficult for workers to assess how one pension scheme compares to another, posing practical barriers to mobility that should be eased. This Working Paper relates to the 2010 OECD Economic Survey of the Netherlands (www.oecd.org/eco/surveys/ netherlands).
- Pension solvency, recovery plans, financial crisis
- JEL Classification:
- G23: Financial Economics / Financial Institutions and Services / Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors
- H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions
- H75: Public Economics / State and Local Government ; Intergovernmental Relations / State and Local Government: Health ; Education ; Welfare ; Public Pensions
- J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions
- J62: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Job, Occupational, and Intergenerational Mobility