Dutch Pension Funds in Underfunding: Solving Generational Dilemmas

Posted: 3 Mar 2010

See all articles by Niels Kortleve

Niels Kortleve

PGGM Investments

Eduard H.M. Ponds

Algemene Pensioen Groep (APG); Tilburg University - Department of Economics; Netspar; Tilburg University - Center for Economic Research (CentER)

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Date Written: November 1, 2009

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

Kortleve, Niels and Ponds, Eduard H.M., Dutch Pension Funds in Underfunding: Solving Generational Dilemmas (November 1, 2009). Available at SSRN: https://ssrn.com/abstract=1553240

Niels Kortleve

PGGM Investments ( email )

Utrechtseweg 44
P.O.Box 117
Zeist, 3700 AC
Netherlands

Eduard H.M. Ponds (Contact Author)

Algemene Pensioen Groep (APG) ( email )

P.O. Box 75283
Amsterdam, 1070 AG
Netherlands

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Center for Economic Research (CentER) ( email )

Tilburg

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