In Europe, as a member of the European Parliament, a Senator and chairman of the European Affairs Committee, regulation on pensions has had and continues to have my special attention. There are European rules that pension institutions in Europe have to comply with.

There are rules for cross-border activities of pension institutions. There are also European rules for the risk management and governance of pension funds. There are separate rules for cross-border value transfer, the so-called portability of pension rights accrued in another Member State. By setting European rules on the supervision of pension institutions, Europe wants to stimulate so-called second-pillar provision in Europe. Incidentally, the rules on supervision and funding are open standards that must be supervised by the member states themselves.

The pension system in the Netherlands is different from what is common in Europe. Most countries have a pay-as-you-go system similar to the pay-as-you-go system for our AOW. We have saved for pensions to be less dependent on the National Budget and, of course, a declining population that increases the pension burden per citizen.

But even in our capital-backed system, there are uncertainties. The risk of living longer and also the interest rate and stock market results make it clear that our system is not infallible.
So change and optimisation was needed, which took shape in the Future of Pensions Act. Consideration of this law kept minds very busy. For the spokesperson on this dossier in the Senate, the last month was far from quiet.

Those in favour and, in particular, the many opponents really pulled out all the stops to ensure that the pensions project, a product of the polder negotiated for years, was shipwrecked within sight of the port.

But, on 30 May, after the necessary commitments on adjustments, the major overhaul of the second-pillar pension system was nevertheless decided positively by a very large majority. In the old system, it was simple, you collectively save for a pension entitlement, th

at saving is done with an equal contribution for each participant. To maintain the entitlements of participants in a fund also in the future, calculation rules were drawn up. The strict rules in the nFtK provided a lot of security, but also large buffers that could not be paid out. The consequence of hoarding and not being allowed to adjust to increases in wealth is that many pensioners have suffered a sharp decline in disposable income.

An adjustment of the system was needed, not only to be able to pay out earlier in case of a rise in returns, with the consequence, incidentally, that moving with the economy also means that pensions, in terms of accrual, can also go down. Incidentally, to prevent an economic downturn also having an immediate effect on pensioners' income, they can be compensated by supplements from the mandatory solidarity fund.

Another reason to change the system is that in the current system, young and old pay the same premium. The so-called average premium. A young person's premium can pay off longer, the opposite is true for older workers. That problem used to be overcome because young majority became old in the same system. That is no longer the case as people change jobs or become self-employed. In the new system, the average contribution has been abolished.

The WTP as we now call the law is now a totally different concept due to the deliberations in the polder. Minister Koolmees still stood for; either a personal pot or a risk-sharing scheme.

It is now the Solidarity Premium Scheme that has been chosen. A scheme where risks can be shared when necessary, for instance to guarantee an income in case of the loss of a parent or partner.

There are many misunderstandings about the distribution of the 1,400 billion pot by which is not meant a personal money pot, but it is the entitlements of each participant that are divided into small pots. This is what we call the transition. It follows a plan that each fund has to discuss with members, pensioners and their representatives.  The plan is then submitted to the Dutch Bank for approval.

Will surely everything go well? No risks are always there. IT has to ensure that data of some 10 million stakeholders is in order, and sufficient manpower must also be available.

For the transition, the initial deadline was too short. This is now being adjusted and also, with the appointment of a government commissioner to identify where things are pinching, an intervention throughout the transition process will be possible, improving feasibility.

There is a lot of work for the funds to do to ensure successful implementation.

More importantly, members, surviving relatives and pensioners must be adequately informed. That objective information has been lacking so far.

Ria Oomen-Ruijten
Former Member of the European Parliament and former Member of the Senate