For many years already, pension funds have been in heated discussions about the actuarial interest rate. Currently, these discussions form an obstacle for reaching a pension agreement. This agreement should lead to new, supplementary pensions, for which employers have to save on top of their basic pension (AOW). According to Tuur Elzinga, a pension negotiator of the trade union FNW, the pension funds should use a higher actuarial interest rate in their calculations for the new system. Other trade unions as well as pension funds themselves support this demand. However, Minster of Social Affairs and Employment Wouter Koolmees and the Dutch Central Bank find this demand unacceptable.
For economists, the most important question is with what intention the trade unions and pension funds demand a higher actuarial interest rate. The fear is that they want to increase pensions quickly, even if that is to the detriment of the younger generation. Bas Jacobs, Sijbren Cnossen Professor of Public Economics at Erasmus School of Economics, fears that the trade unions want to benefit from the windfalls when it all goes well, but do not want to have setbacks when it does not. Thus, according to Professor Bas Jacobs, hard agreements have to be made about how the funds will divide windfalls and setbacks in the investment results among the participants of the pension fund.
Moreover, Professor Bas Jacobs fears that some pension funds might be tempted to take too much investment risk when the pension benefit becomes less certain. As a result of this latter, they can realise high short-term returns and increase the pensions. However, in the long run, this will increase the chance of big setbacks. When I look at these concers, I understand why Minister Koolmees and the Dutch National Bank do not want to admit to the demand, says Professor Bas Jacobs.
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Read the entire article (in Dutch) on NRC Handelsblad, 31 October 2018.