Pension crisis

For 15 years, politicians have been trying to reform the pension system. So there must be something wrong with the current system. Fixing what is wrong is apparently very complex. I heard the chairman of the pension funds' umbrella organisation say that we have the best pension system in the world. So why should it be different? In my memory, the criticism of the system once came from the left and it had everything to do with the young paying for the old. The core values of the new system are collectivity and solidarity. Huh? Where does that come from? Is that what happens when you wait 15 years and those young people have suddenly become older too?

Have we abandoned the principle of self-reliance?
In the new system, there is no longer an increasing contribution rate, which remains the same throughout the accumulation period. But the benefit depends on the pension fund's investment performance. They call it rafting when the transition from the old to the new system takes place. I find that quite exciting, will the accrued capital then be redistributed? We do talk about €1,500 billion. We have also experienced during the crises of the past few years (say the Rutte period) that pensions could not be indexed or were even cut. So the state of the economy already plays an important role in the current system too. Why do we have a pension system in the first place?

In prehistoric times, social partners thought it was important to give workers as much protection as possible. Apparently, there was a reason for this, because worker self-reliance was low. You could say, an employee gets a salary and saves from it for his old age, if he wants to. The basic provision, the state pension, is there for everyone, so no one has to save for that. You can get by on that, it is calculated on the basis of the minimum wage. If you want more then you have to save yourself or keep working. No, the idea was that of extra care, so that old age could be filled in comfortably financially.

But then what is the income you need for this?
Originally, this was related to last earned salary (final pay). Because costs are assumed to be lower in the inactive period than in the active period, a rate of 70 was assumed for state pension and pension together. This meant that the employer always had to top up the pension fund in case of a salary increase, as it also applied to past years of service. It went well for years, until suddenly people thought it was too expensive. To dilute the effect of salary increases, the average pay system was introduced, where pensionable earnings were calculated on an average over the entire period of service. Even that still proved too expensive. The defined contribution system was introduced, under which only the contribution was fixed and no longer the future benefit. As a result, employers had fixed their charges towards pensions. In some schemes, the employee could choose how the pension capital was invested, so there was individual influence. Seems fine that way, you would think.

No, a drastic change to the pension system was needed after all. The pension agreement ended 15 years of wrangling and the laws could be passed through the chambers. Until Agnes Joseph entered the discussion. At the heart of the amendment she tabled concerns the individual freedom she wants to grant to pension fund members. They should have the freedom to choose the current or the new system. She represents a substantial group of people who will see their pension rights evaporate. The Lower House united and tried to tame her rebellious behaviour. MPs became increasingly angry during the debate as Joseph proved adamant. Emotions ran high. All together, they stand ranting against the poor woman. Still, if everyone thinks it is a nonsensical amendment, just put it to a vote and democracy will do its job. Or does it bring to light something that politicians do not want to see? Of course, there may be a certain dossier fatigue that makes no one really want to look into the issues identified.

The industry says it is too difficult, because then you want to keep two systems in place. That cannot be an argument, because after all, you assume that everyone will switch to the improved system. Maybe a handful of inveterate opponents won't, but you just put them in a separate fund. No, it would cost millions to implement her amendment. Now I am really wary. If that is the only counter-argument, I want to delve further. Agnes Joseph's party (NSC) founder may have just left politics, but he has made his mark as Don Quixote in the Surcharge Debate. And we know what he ended up exposing. She is following his example. Courageous.