Pensions and Providence: Dutch Employers and the Creation of Funded Pension Schemes

From an international perspective, the Dutch system of old age provisions stands out for its wide coverage, fixed benefits, and an overall actuarial soundness that seem to make this system more shock proof to demographic shifts and economic adversities than those in other “Western” countries. Its actual foundation is a compulsory old age insurance for all citizens, enforced by law and implemented by the state; this insurance is supplemented by fully funded pension schemes for workers and employees, operating under legal control; and finally there is a variety of additional and noncompulsory pension benefits and individual insurance arrangements. The main impetus to the genesis of this system came from employers who, with different agendas, created various pension funds; eventually it was the state, which set a decisive example with a funded pension fund for its civil servants. This became the standard to all corporate pension schemes and provoked innovations like branch funds. These initiatives were supported and regulated by legislation that made these arrangements compulsory and guaranteed their juridical independence and actuarial soundness. Only after this legally promoted maturation of private funds, the state set out to create public arrangements on a “pay-as-you-go” basis for all citizens. This delicate interplay between private and public pension arrangements is highly characteristic of the Dutch variety of capitalism in a broader context. In the polarity between liberal and coordinated market economies, as developed by Soskice and Hall, the Dutch system of old age provisions has played a prominent role in ranking this country more firmly into the latter category. However, within this range of countries the Dutch system of old age provisions is also a bit atypical: private corporate and branch arrangements were encouraged and at the same time embedded in a legal framework. The role of the state was also remarkable: a supervisor of the private funds, a collector and distributor in a universal insurance system, and an employer with an exemplary pension scheme.