Summary of the Answers of the Dutch Pension Fund Organizations on the Green Paper

towards adequate, sustainable and safe European pension systems

November 12th, 2010

PRELIMINARY REMARKS
The Dutch Pension system is based on a multi-pillar approach with a strong role for
occupational pensions in the second pillar covering 90% of the working population in The
Netherlands. The Dutch Pension Fund Organizations OPF (representing the company pension
funds), UvB (representing the pension funds for self-employed persons) and VB (representing
the sector wide pension funds) emphasize the need for such a multi-pillar approach to
pensions in Europe. In the occupational pensions area the Dutch Pension Fund Organizations
favour collectivity and risk sharing as powerful principles in their system.
At the European level, occupational pensions should continue to be considered as part of
labour agreements. Pension funds use the financial markets to increase the return on
investment and to hedge risks for the sole profit of the beneficiaries. Any EU rule on
occupational pensions should take account of these specific characteristics.
Apart from adequacy, sustainability and security, the governance of pension schemes and
communication to beneficiaries are also important issues in retirement provision.

The second pillar pension system in the Netherlands is fully funded. A high inflation is one of
the most important threats towards the future. The Dutch pension funds organizations would
like to stress the importance of the Growth and Stability pact to ensure an acceptable level of
inflation in the European Union.

The Dutch Pension Fund Organisations call for an impact assessment of any planned EU
regulation on pensions whilst respecting the social and labour law of the Member States.
Any EU regulation on pensions shall
take into account the specific role of social partners, whilst governments at Member
State and EU level offer a facilitating regulatory framework;

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 respecting the subsidiarity principle in retirement benefit provision and associated
regulatory framework in the Member States;
enhancing long-term sustainability of the rich variation in retirement provision in EU;
ensuring efficiency and flexibility for all provisions in the Member States.

This is certainly important in a revision of the IORP Directive, the ongoing reflections on a
security regime for pensions, but also in the discussions on the further development of the
international accounting standards.
The following contains the Dutch Pension Fund organizations’ answers to the Green Paper
towards adequate, sustainable and safe European Pensions, and their reflections on the future
of the European Pension Systems.

QUESTION 1
How can the EU support Member States’efforts to strengthen the adequacy of pension
systems? Should the EU seek to define better what an adequate retirement income might
entail?
To define adequacy is up to the Member States
A solid multi-pillar approach can help to provide for adequate pensions
The EU should enhance the setting up of occupational pension systems
The EU should strengthen the social dialogue on social protection issues

QUESTION 2
Is the existing pension framework at the EU level sufficient to ensure sustainable public
finances?

No, the Stability and Growth Pact should be re-inforced

Member States should be invited to reform their pension systems and have sound
economic governance

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QUESTION 3
How can higher effective retirement ages best be achieved and how could increases in
pensionable ages contribute? Should automatic adjustment mechanisms related to
demographic changes be introduced in pension systems in order to balance the time spent in
work and in retirement? What role could the EU play in this regard?

Changes in attitudes towards elderly workers should help encourage companies to

employ also elderly workers
Retirement age is foremost a matter of the Member States and the social partners
Strengthen lifelong learning programs
Automatic adjustment mechanisms need to be introduced in order to balance time
spent in work and in retirement, the decision to do so is up to the Member States
Demographic developments have to be considered in respect to sustainability of
pension systems

QUESTION 4
How can the implementation of the Europe 2020 strategy be used to promote longer
employment, its benefits to business and to address age discrimination in the labour market?

EU 2020 strategy is a good starting point

The EU should make sure that the flagship initiatives will be put into practice
Member States should come up with plans how to implement these initiatives
Regular reporting and monitoring of these initiatives is necessary
Enhance social dialogue and engage social partners

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QUESTION 5
In which way should the IORP Directive be amended to improve the conditions for cross-
border activity?

Work on common definitions

Facilitate cross-border activity
Enhance security and sustainability of pensions without creating a tightening European
regulatory framework

QUESTION 6
What should be the scope of schemes covered by EU level action on removing obstacles for
mobility?
The scope of the action should be all work related pension schemes in every Member
State independent of how these schemes are submitted to the national pillar structure
The EU should define general principles with sufficient flexibility for Member States
to accommodate them with their legal structures

QUESTION 7
Should the EU look again at the issue of transfers or would minimum standards on
acquisition and preservation plus a tracking service for all types of pension rights be a
better solution?

It is doubtful whether the EU will find a solution to the large variety in technical and
actuarial parameters used for transfers within the various Member States
No transfer until there are minimum standards
Pension institutions should be allowed to use their own standards for the valuation and
transfer
Member States should be able to maintain effective safeguard mechanisms for
preventing tax evasion
Minimum standards suitable for incorporating in the framework of social and labor
law in the Member States and on the preservation of accrued pension rights
Tracking service a vital tool (see Dutch Pensioenregister)
Learn from each other

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QUESTION 8
Does current EU legislation need reviewing to ensure a consistent regulation and
supervision of funded (i.e. backed by a fund of assets) pension schemes and products?
Broaden scope of the IORP Directive including all types of work related pensions such
as DB, DC, book reserves and PAYG schemes
Provide for overarching principles: forward looking risk-based approach, market
consistency, transparency, proportionality, practicality, flexibility
Avoid pro-cyclical effects
Balance between adequate degree of security and affordable costs to the sponsor
Scope of the IORP Directive should be restricted to not for profit institutions where
the risks are borne by employers and (future plan members)
Supervision should include prudential and behavioural aspects
Better disclosure and communication needed

QUESTION 9
How could European regulation or a code of good practice help Member State sachieve a better
balance for pension savers and pension providers between risks,security and affordability?
Focus need to be led on pension promise
Rather go for a survey of good practice than a code of good practice
Dutch example: risk sharing, lower costs due to collectivity, professional investment
policy, annuities instead of a lump sum
Default option for DC schemes in combination with life cycle investment strategies,
restricted number of alternatives for participants, collectivity, limited costs as a result
and the delivery of an annuity

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QUESTION 10
What should an equivalent solvency regime for pension funds look like?
Discussions about pension security should go hand in hand with review of IORP
Directive
A security regime for pensions should be tailor made for pensions and take account of
the specific features of pension funds and the nature and duration of the pension
promise
Take account of the total pension rights
Use Principles as brought forward by CEIOPS, Groupe Consultatif and OECD
Re-inforce IORP on the governance principles (risk management, conflict of interests,
remunerations, involvement of employers and employees), outsourcing to service
providers and responsible investment policy
Best practices survey about risk management and governance necessary
Impact assessment necessary of the influence on relevant factors (price, security and
availability of occupational pensions)

QUESTION 11
Should the protection provided by EU legislation in the case of the insolvency of
pension sponsoring employers be enhanced and if so how?
We are not in favour of promoting a EU wide guarantee scheme for pensions
Danger of excessive risk taking, if there is a fall-back solution
In the Netherlands, the company and the pension funds are legally separated entities
A strict financial supervisory regime is applicable in the NL

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QUESTION 12
Is there a case for modernising the current minimum information disclosure requirements for pension
products (e.g. in terms of comparability, standardisation and clarity)?
Proper information of members and beneficiaries of a pension scheme is crucial
Information should include financial health of institutions, contractual rules, benefits and
financial of accrued pension entitlements, investment policy and management of risks and
costs
Members should be informed when joining the scheme and on a regular basis (in the
Netherlands once a year)
Stimulation of financial education necessary
Clear distinction between life insurance products and supplementary pension necessary

QUESTION 13
Should the EU develop a common approach for default options about participation and investment
choice?
Default not an option in the Dutch occupational pension system because of mandatory
participation and high participation level
Common principle based approach on default options about participation and investment
choice
Protection of beneficiaries, disclosure principles of IORP

QUESTION 14
Should the policy coordination framework at EU-level be strengthened? If so, which elements need
strengthening in order to improve the design and implementation of pension policy through an
integrated approach? Would the creation of a platform for monitoring all aspects of pension policy in
an integrated manner be part of the way forward?

Use and enhance the Open Method of Co-ordination

EU Platform including all pension pillars with experts, stakeholders, Member States’
representatives, social partners and associations of pension funds to address issues exists with
the current European Commission Pension Forum
Keep the holistic approach on pensions (ECFIN, EMPL and MARKT)