Reform Options for Mature Defined Benefit Pension Plans: The Case of the Netherlands

January 25, 2019

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Format: Chicago

Marc Gerard. Reform Options for Mature Defined Benefit Pension Plans: The Case of the Netherlands, (USA: International Monetary Fund, 2019) accessed September 24, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The Netherlands has been operating fully funded, defined benefit second pillar pension schemes that have consistently ranked high worldwide for delivering high replacement rates while featuring strong solidarity among members. Yet the long-term sustainability of the Dutch pension funds has been undermined in recent years by protracted low interest rates and unfavorable demographic developments, exacerbating controversies over intergenerational transfer mechanisms within the plans. This has prompted a national debate over ways to move toward more individualization while preserving financial security at retirement for all. This paper draws on this experience, illustrated by stress testing simulations and assessed vis-à-vis solutions implemented in peer countries, to discuss the main policy trade-offs associated with the reform of mature pension systems in advanced economies.

Subject: Aging, Expenditure, Labor, Labor markets, Pension spending, Pensions, Population and demographics, Wages

Keywords: Aging, Benefit, Benefit curtailment, Benefit indexation, Defined benefit plans, Defined contribution plans, Fixed income, Fully funded, Global, Indexation benefit, Industry wage development, Inflation shock, Interest rate, Labor market, Labor markets, Pension funds, Pension mathematics, Pension spending, Pensions, Rate of return, Ratio, Replacement function, Risk pooling, Solvency, Solvency ratio, Stress tests, Wage, Wages, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/022
Stock No:

WPIEA2019022
ISBN:

9781484395912
ISSN:

1018-5941

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