16 April 2020

Dutch Pension Deal should distribute financial shocks fairly, but how?

Kees Groffen
The coronavirus pandemic causes human suffering, will lead to financial shocks and may hit pensions hard. The expectation is that those in work will be able to mitigate losses with future earnings, but pensioners do not have this opportunity. Two eminent economists in the Netherlands recently outlined a pension system that distributes shocks between the young and old. They propose attributing financial risks based on personal pension assets and objective market valuation. Pension funds divide the non-financial risks (life expectancy, expected future return and inflation) based on subjective estimates and defined ambition. This enables pension funds to distribute highs and lows, in the interest of social cohesion. Their blueprint can help the government and others who are currently engaged in working out the details of the new Pension Deal.
This article is only available in Dutch, click here to read it.