After the biggest union within the Federation of Dutch Unions (FNV) last week voted against proposed pension reforms, the nation is unsure on the future of their pensions. Pension Funds Insider sets out the dilemmas and the current state of affairs in one of Europe's most sophisticated countries, when it comes to retirement provision

In early June of this year, the Dutch coalition partners struck a deal with its social partners and a concept for a new structure to pension provision was agreed upon. After more than a year of sitting around the negotiation table, the parties were more than glad to have reached a deal.

Soon after, however, various unions started criticising the plans; it wasn't fair on the young, the hard labourers and some said on the soon-to-be retirees.

The plans for the Netherlands included an increased retirement age and a more balanced risk between employees and employers, which would ensure that the economy would be able to deal with the ageing population and market volatility.

The proposals would mean the end of guaranteed pensions (if there ever was such a thing) and would mainly be beneficial to pension schemes. What needs to be understood is, it seems, that without these schemes functioning as they must employees would be left with nothing. Pension schemes, like every other company after all, need to adjust their offering to the current economical climate and this is exactly what they are trying to do in the Netherlands.

The new legislation, should it go through, will ensure ongoing pension provision for young and old at a saving of 0.7% of the country's GDP, helping maintain the sustainability of the government's finances. The state pension will be guaranteed to rise in line with inflation until 2028 and will also see a 0.6% increase annually from 2013. .

After last week, when FNV Bondgenoten revealed that their members had voted against the deal, one last attempt was made to get the unions to agree; a federation meeting was suppose to bring clarity. But it wasn't to be; the 19 chairmen of the federation's unions couldn't agree on what needed to be done to make the deal acceptable.

In roughly two weeks time, on 12 September, the federation's chair, Agnes Jongerius, has to give a final 'yes or no' to the Minister of Social Affairs, Henk Kamp. The wait is for one last union, Abvakabo FNV. According to Jongerius going back to the drawing table is not an option, the Dutch have to work with what is already there.

It appears that what is the country's strength has now become its weakness – parties who look out for the interest of employees and retirees.

The Netherlands has always been famed for its strong pension market and excellent pension provision, but where will this resistance to change end? And ould this also be seen as a sign of things to come in other European countries when reform is proposed?

It will all depend on the next steps in the process.

Although the federation is opposed to completely new negotiations it has said that it would be willing to think about slight alterations, and this is what the Minister has started doing.

Facing pressure from the opposed unions and the opposition parties (who would like to see that the government does more for people on low incomes who would like to stop working at 65, instead of 66 or even 67), the Minister has come up with some ideas.

Under the new proposed regime those who will stop working before the retirement age will lose 6.5% of their state pension. The Minister has now said he would consider offering a cash compensation (€300 Euros) to those on just benefits who want to stop at 65. In addition, people with low incomes will get 'some extra' money – how much is unknown.

The problem however, is that these proposals are still vague and no funding is technically available for them. Plus, the whole point of the reforms is that a tougher approach is needed – there simply will be no money left otherwise. It appears that these new proposals, as add on to the plans on the table, are only there to keep the unions happy.

The question is – who will benefit from them in the end?

25.08.2011

azeevalkink@wilmington.co.uk