How to Close the Funding Gap in Dutch Pension Plans? Impact on Generations
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.
|Date of creation:||Apr 2010|
|Date of revision:||Apr 2010|
|Publication status:||published on the Center for Retirement Research at Boston College website|
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- 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(01), pages 91-105, January.
- 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.
- Ponds, E.H.M. & van Riel, B., 2009. "Sharing risk : The Netherlands' new approach to pensions," Other publications TiSEM dffdb2a2-5a3c-45e1-b166-c, Tilburg University, School of Economics and Management.
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