“A pension is not just a financial agreement; it’s a social agreement,” Martijn Vos tells CIO. Ortec’s office overlooks a sunny Amsterdam, but the summer peace disguises a disquiet in its pension system: “There is a lot of mistrust in pension plans—they’re trusted less than insurers or banks.” Rock-bottom interest rates and low returns have left many funds facing the very real prospect of cutting benefits. The Dutch are rightly proud of their pension system, but nobody likes to get less money than they were expecting.
It was a lesson Vos learned at the peak of the financial crisis in 2008 and 2009. Collapsing equity markets and interest rates had wrought havoc on Dutch funds. An average funding level of 140% had fallen to 105%, below the required solvency level, and many pensions had no clear path back. A manufacturing company was one of the first to cut its benefits, and it was front-page news. “It was a hard lesson,” Vos recalls. “People are used to getting that letter telling them how much they will get each month. No one expected to get less.”
The prospect of a second round of benefit cuts in less than a decade has everyone talking about change—but it is exactly this social side of pensions that makes Vos tick. “I was at George Washington University recently to discuss increasing US contribution rates,” he says. “Here we pay 20%; in the US they’re talking about going from 4% to 5%. It’s a completely different mindset. You have to bring in those social and cultural elements to connect things up.” —Nick Reeve