Aegon : Dutch lessons on the changing face of retirement

In an environment where states unable to provide the same level of social protection as in the past, and company pensions under pressure, there is an increasing shift in responsibility to individuals to save for their own retirement. This is aligned with societal changes of individualization that we see all over the world.

Labor markets have changed fundamentally. In the past many people stayed in the same company or sector for their entire working life. That is now the reality for only a small minority. Today's workers switch careers, change sectors and take career breaks. All of which makes it very difficult to share risk by saving in a workplace retirement scheme.

Persistently low interest rates, increased longevity and increased capital requirements have led to a shift away from guaranteed products - which are now extremely expensive for customers - to more asset management type of products.

Defined contribution

Defined contribution pension plans make up over 50 percent of current the company pension schemes provided by insurers in the Netherlands, and almost 100 percent of new schemes - making DC the new norm.

The fact that younger generations will have a defined contribution scheme instead of a guaranteed pension benefit, explains why they do not wish to pay for what they see as better pensions for older generations; older generations who also had the luxury, in their eyes, of retiring earlier.

The Dutch government recently intended to anticipate this resistance by abolishing the system of average premiums and introducing a premium that is tailored to the individual circumstances of the individual pension saver. This was to be an essential element of a new pension system.

However, the government did not succeed in reaching an agreement in November 2018 with the trade unions on a pension system without risk sharing between generations.