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How to Close the Funding Gap in Dutch Pension Plans? Impact on Generations

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  • Eduard Ponds
  • Niels Kortleve

Abstract

Pension plan sponsors in the Netherlands are facing their second funding challenge in the past decade, this one more severe than the first. Following the economic crash in 2008 - 2009, the funding levels of most plans fell below the 105 % threshold set by the Dutch supervisor, De Nederlandsche Bank, which requires recovery of the minimum funding ratio within five years. It is not yet clear, however, how plans will make up the deficits - except from profiting from a recovery of financial markets - and how the burden of any necessary adjustments will be spread among workers and retirees. Although earlier in the decade most Dutch pension plans were restructured to include automatic reductions in benefit indexation if funding drops below given thresholds, that mechanism may not be enough to achieve recovery this time around. Policymakers now have to consider more substantial measures, including contribution increases and nominal benefit cuts, actions few anticipated would be ncessary.

Suggested Citation

  • 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.
    • Handle: RePEc:crr:issbrf:ib2010-7
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    References listed on IDEAS

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    1. Ponds, Eduard H. M. & Riel, Bart Van, 2009. "Sharing risk: the Netherlands' new approach to pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(1), pages 91-105, January.
    2. 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.
    3. Ponds, Eduard & Steenbeek, O.W., 2016. "The Netherlands," Other publications TiSEM 5e51439c-3808-4aeb-adad-0, Tilburg University, School of Economics and Management.
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    Cited by:

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    2. Xiaoxing Liu & Ying Zhang & Lin Fang & Yuanxue Li & Wenqing Pan, 2015. "Reforming China’s Pension Scheme for Urban Workers: Liquidity Gap and Policies’ Effects Forecasting," Sustainability, MDPI, vol. 7(8), pages 1-19, August.
    3. Rob Bauer & Inka Eberhardt & Paul Smeets, 2022. "A Fistful of Dollars: Financial Incentives, Peer Information, and Retirement Savings," The Review of Financial Studies, Society for Financial Studies, vol. 35(6), pages 2981-3020.

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