The legislation that governs pension funds in the Netherlands, the Financial Assessment Framework, is moving pension funds “from less certain to certainly less," said Peter Borgdorff, managing director at Pensioenfonds Zorg en Welzijn, Zeist, Netherlands.
The second version of the FTK will implement changes to Dutch pension law, including changes to the discount rate and solvency buffers, and is due to take effect next year.
Mr. Borgdorff acknowledged that changes were necessary. "Our pensions system needs maintenance. But that doesn't means we need a completely new building. We also have a lot of interest in the sustainability of pension commitment."
Referring to the changes in the framework legislation, he said pension funds will "now have to focus on nominal security above all. Indexation will be deferred at least until buffers are firmly in place. (Changes) also allow for the postponement of pension reduction. Within the Financial Assessment Framework, we are moving from less certain to certainly less."
Certainty, or rather lack of, was one of the central themes in Mr. Borgdorff's keynote speech to delegates at the WorldPensionSummit held in The Hague on Wednesday.
"Pensions are uncertain," he said. "No government offers an absolute guarantee on a pension which will be adjusted in line with inflation. We believe that we should share this uncertainty with the participants. Don't tell fairy tales. There is nothing certain in life ... tell them what it means for them as individuals."
When questioned on the one thing he would change if he were pension minister for a day, Mr. Borgdorff said he would move toward equal contributions across generations.
"We have to change the way we build our pensions. I firmly believe that we need a pensions system that is not affecting the labor market. The younger pay more than they get, and the older get more than they pay for. We have to solve that problem. I want to stick to equal contributions for everybody ... and that is not because I think the existing system is bad, but (because there are questions about) 'do I get what I'm promised?' We need a promise that we can stick to."
Mr. Borgdorff also addressed the topic of sustainability — something that the €156 billion ($194.6 billion) pension fund is working hard on, with a pledge to increase sustainable investment fourfold to €16 billion.
"A good pension is worth nothing in a polluted and unsafe world. We intend to use the power of this money to bring a better world closer," he said.