Those Dutch Pensions – a Civil Servant writes

civil servantsI get some feedback on my blogs from people I know who don’t want to or aren’t allowed to go public. Here’s an example from a formidable figure and a personal friend (who I know/hope has the skin or a rhino and a great sense of humour!)

He’d been reading this , a blog where I’d been deriding the so called severity in Dutch pension cuts

Just read your blog. I think I disagree a lot with your assessment. I need to check facts (and want to critique Dutch pensions for another reason so will) but I think the position is Mitch (sic)  worse than you say.

Basically, members had been led to expect indexed pensions. No doubt they were not GUARANTEED them, but I bet they thought they had been.

So the nominal reductions are on top of a varying number of years of no indexation. So real cuts.

The bottom line is that in most cases they are DC as employers do not  have to make good deficits. So like all with profits, bonuses are a  fine judgment and easy to under or over distribute. Or depending on  the premiums, the promise might be simply unaffordable

And I think the comparison with UK is misleading. I think the argument was that Dutch pensions provide 40% more that UK DC pensions rather than UK guarantees DB pensions.  The reason being charges and investment post retirement.  The Dutch are I fear finding that the assumed extra return from investing longer in risky assets ignores the downside risk.

That is all without considering whether the Dutch regulatory framework  is fit for dealing with inter generational fairness

A very interesting area for study.

(My correspondent was kind enough not to point out that my maths was a little out and that the 1.9% cut reduced the advantage to below 37% (but plenty of wonky actuaries had got there first!).)

It’s absolutely true that the Dutch are getting nominal pension cuts (eg the pensions actually go down, it’s not just that they don’t keep up with inflation). My correspondent is used to pensions that go up with inflation (being a civil servant), the rest of us will be getting pensions that remain flat – and I argue that most of us  can’t afford indexation.

I don’t want to sound over-chippy , but I’m tired of being reminded how crap our DC pensions are  by people who are benefiting from the gilt-edged pensions my tax bill is paying for!

The first question is whether we can boost our DC pensions by improving efficiencies, pooling mortality risk and ridding ourselves of spurious guarantees.

The second question is whether there is some white knight out there who is going to insure the promises (a bit like I’m doing for my  friend and the Pensions Minister who’s pension is similarly  underwritten by my taxes!).

The answer to the first question (judging by how things are going so far) is that we are unlikely to see these efficiencies anytime soon (I live in hope).

As for the second question, I see no interest from Government in them extending the tax-payers largesse to the public sector to helping out private sector DC pensioners.

This is the DC triple lock

NO help with annuities – despite the Govt having in the PPF a perfectly viable vehicle for providing funded scheme pensions for those in DC poverty

NO support for the Dutch system – preventing real innovation in workplace pension scheme design

NO new incentives for large employers to offer any form of pension risk-sharing

UK DC pensions are pinned to the floor by over-regulation and the Government is failing to get the DA debate beyond the narrow corridors of Brighton and Whitehall. I said earlier this week that Steve Webb has the opportunity to use the new technologies to get the views of the UK public and this is where he should start.

It’s time we , as tax-payers were invited to decide just how important these regulations are to us and whether some easements that allowed us to operate more like the Dutch, would be acceptable to us.

By us, I do not mean the civil servants, I mean the people who pay the civil servants pensions and get crap pensions back

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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13 Responses to Those Dutch Pensions – a Civil Servant writes

  1. John Lawson says:


    We have tried with-profits in the UK. It is not a bad concept but gives rise to lots of issues:

    1) Over-promise and under-deliver. As your civil servant says, the expectation is set and mot met. And you may dismiss a 2% nominal cut as irrelevant but that is actually a 5% real cut and on top of a 10% real cut last year. Two years ago I had £100 to spend, today I have £85 or £86. That is material for a pensioner. This is exactly what happened with endowments that are failing to repay interest only mortgages. As a member of the insurance industry that sold them, I’m not proud of what we did, but I have learned a lesson.

    2) People try to game them. Some investment savvy people, particularly advisers, realise that they can park customers in with profits funds in stormy times and withdraw them when the upturn looks likely to appear. Insurers put in place complex market value adjustment mechanisms to stop this gaming yet the press and advisers moan about this practice.

    3) People don’t want to share. Inter-generationally or intra-generationally. That is why an independent approach rather than a collective one is gaining ground. What is fueling the SIPP boom or drawdown? No collective mindsets here.

    And don’t expect the government to underwrite investment or longevity risk. And, as I said in my other comment on Linked-in, Holland isn’t the Utopia that others espouse.

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