DISCUSSION PAPER PI-9611
International Experience of Pension Fund Reform and its
Applicability to the Netherlands
Paper presented at the workshop on "Choice and Accountability
in the Dutch Pension System", the Hague, May 8, 1996.
E. Philip Davis
The Dutch pension system is well-designed to ensure a significant role for
private pensions, since the replacement ratio falls sharply with income.
Perhaps as a consequence, "supplementary" pension funds have developed
over a long period, often as a result of collective bargaining, to cover virtually
the entire labour force (83%) -- despite not being invariably compulsory for
employers (except where there are industry-aide agreements and in the public sector).
This is highly unusual, since in most countries where provision is voluntary
and occupational, coverage tends to peak at around 50% (UK, US). Countries
with higher coverage (Switzerland, Australia, Denmark) tend to have compulsory
coverage and/or a large proportional of personal pensions
This paper assesses how the international experience of moving from defined
benefit to defined contribution pension plans applies to the Netherlands. One
key conclusion is that many of the drawbacks of defined benefit schemes in
other countries -- non-portability and non-indexation -- are largely lacking in
the Dutch model. Nevertheless, two areas of international practice which might
be of relevance are moves in the direction of defined contribution and personal
pensions and experience of increased competition in fund management.
Key words: Dutch pensions, defined benefit schemes, pension reform.