In many countries occupational plans are being reformed from Defined-Benefit (DB) to Defined-Contribution (DC) designs. In a Netspar discussion paper Lans Bovenberg and I explore the case of the Netherlands, which features a particularly high ratio of occupational pension assets to GDP. Most occupational schemes are DB-funded and the value of assets in these schemes amounted to about 170% of GDP in 2013. This implies that unanticipated shocks in financial markets and longevity require large changes in pension contributions in order to shield pension rights in DB-plans from these shocks. Therefore, Dutch occupational defined-benefit plans suffer from a number of serious weaknesses, including ambiguous ownership of assets, back-loading of benefits, and lack of tailor-made risk management. In particular, an intergenerational conflict may emerge about not only the ownership of capital in the fund but also the investment profile. These potential intergenerational conflicts are especially serious in the Netherlands due to […]

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