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Dutch Pension Funds in Underfunding: Solving Generational Dilemmas

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  • Niels Kortleve
  • Eduard Ponds

Abstract

Pension funds in the Netherlands are facing their second solvency crisis within a period of six years. As most Dutch pension funds effectively are arrangements of intergenerational risk sharing, especially the larger sector pension funds, the necessary recovery process implies various generational dilemmas. We distinguish various policy options, among them contribution rate increases and benefit cuts, and compare them on the aspect of intergenerational redistribution. Most pension funds in the Netherlands stem from the 1950s, and the current pension plan setting still reflects standards of that period. This practice is currently at stake. The introduction of a new regulatory framework built upon fair-value accounting and risk-based solvency supervision forces pension funds to reconsider their pension plan design and funding process. We discuss a number of reform proposals that currently are in debate.

Suggested Citation

  • Niels Kortleve & Eduard Ponds, 2009. "Dutch Pension Funds in Underfunding: Solving Generational Dilemmas," Working Papers, Center for Retirement Research at Boston College wp2009-29, Center for Retirement Research, revised Nov 2009.
    • Handle: RePEc:crr:crrwps:wp2009-29
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    1. Hans J. Blommestein & Pascal Janssen & Niels Kortleve & Juan Yermo, 2009. "Evaluating risk sharing in private pensions plans," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2009(1), pages 163-184.
    2. Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," The Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.
    3. Hans J. Blommestein & Pascal Janssen & Niels Kortleve & Juan Yermo, 2009. "Evaluating the Design of Private Pension Plans: Costs and Benefits of Risk-Sharing," OECD Working Papers on Insurance and Private Pensions 34, OECD Publishing.
    4. T. A. H. Boeijen & C. Jansen & C. E. Kortleve & J. H. Tamerus, 2007. "Intergenerational solidarity in the uniform contribution and accrual system," Springer Books, in: Onno Steenbeek & Fieke Lecq (ed.), Costs and Benefits of Collective Pension Systems, chapter 7, pages 119-136, Springer.
    5. Jan Bonenkamp, 2007. "Measuring lifetime redistribution in Dutch occupational pensions," CPB Discussion Paper 81, CPB Netherlands Bureau for Economic Policy Analysis.
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    1. Eduard Ponds & Niels Kortleve, 2010. "How to Close the Funding Gap in Dutch Pension Plans? Impact on Generations," Issues in Brief ib2010-7, Center for Retirement Research, revised Apr 2010.

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