Toekomst voor aanvullende pensioenen

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Taking the Dutch pension system to the next level: a view from the outsideThree Sustainability Principles:1. Ensure adaptability: Constantly changing external conditions require anadaptable pension system. Explicit individual ownership rights ensuresystem flexibility so it can adjust over time, and also make pensions portableto other systems.2. Keep it objective: The measure of the health of a pension system shouldbe based on objective market valuations. If the valuations are calculateddifferently from market practice, participants may feel they are better offoutside the system.3. Prepare for extreme weather: A pension system should be robust underextreme circumstances. Don’t build the system based on predictions, buton consequences of possible outcomes.Three Risk-Bearing Principles:1. Avoid winner/loser outcomes: To avoid losing support, pension systemdesign should prevent any one group of participants benefitting at thecost of another group.2. Solidarity in bearing diversifiable risk: A system founded on solidarity inbearing diversifiable risk creates value for all by reducing the individualrisk. For example, it makes sense for individuals to pool their individuallongevity risk with a large group.3. Individuals must bear some risks: Risks that cannot be diversified orhedged in the market should be borne by the individual. Pooling nondiversifiablerisks inevitably leads to transfers between groups in thecollective pool and eventually erodes trust in the system.35It is noteworthy that DNB President Klaas Knot emphasized the pensiondesign principles of clear ownership rights, age-based investment policydifferentiation, participant choice, and intergenerational fairness in a recentspeech. 30 They resonate nicely with the GKL principles set out above.So what does an implementable 21 st Century pension model which scorehigh on these pension design principles look like? That is the question to beaddressed next.Foundations for 21 st Century Pension ModelsIn implementing GKLs design principles, ideas espoused by Albert Einstein(relativity theory), John Nash (game theory), Jan Tinbergen (public policytheory), John Maynard Keynes (public policy theory), and Peter Drucker(governance theory) offer important additional insights:1. Albert Einstein admonished people to make things as simple as possible,but no simpler. In our view, most Dutch pension ‘contracts’ today cannot30 Opening remarks at a DNB Seminar for pension fund trustees held on September 11, 2014.
Toekomst voor aanvullende pensioenen36pass the Einstein test. Many are incomplete, and too complicated fornon-experts to understand. Worse, some of the current reform proposalscreate the risk these contracts will become even more complicated. 31This will reduce the already-declining public confidence and trust in theDutch pension system even further.2. John Nash warned of bargaining arrangements that have potential‘win-lose’ outcomes embedded in them ... they will eventually becomeadversarial. Most Dutch pension arrangements today do not have clearproperty rights (e.g., the size and certainty of future balance sheet claimsof younger and older plan members at any point in time are typicallynot fully defined). Nash’s game theory model predicts that when adverseeconomic conditions such as 2008/9 GFC arise, competing positionsabout the ownership of balance sheet assets and liabilities will surface.This has in fact come to pass. Some of the current reform proposalsperpetuate this ‘win-lose’ problem by using a discount rate curve basedon subjective, changing parameters to determine how money is dividedbetween younger and older plan beneficiaries.3. Jan Tinbergen showed that the number of economic goals to be attainedmust be matched by the number of instruments capable of achievingthem. Two primary economic goals of pension systems are 1. Affordability,and 2. Payment-Safety. Applying the Tinbergen Principle, achievingthese two goals will require two financial instruments (i.e., a longer-term,wealth-creating instrument for affordability, and a shorter-term liability-hedginginstrument for payment safety). Pension models that meetthis duality test might be called ‘2 goals 2 instruments’ models. 324. John Maynard Keynes observed that institutional investors seemedmore interested in winning adversarial trading games (‘beauty contests’)amongst themselves than in creating long term wealth for their clients.We noted in Section III that many pension organizations continue toengage in zero-sum, adversarial, ‘beauty contest’ investment games, butthat a small, but growing number are engaged in longer term wealthcreationstrategies. The ‘2 goals 2 instruments’ pension model offersa clear, unambiguous rationale for adopting explicit longer term wealthcreatinginvestment programs. While such programs may be ‘risky’ ina short horizon context, they are much less so for multi-decade holding31 For example, the recent FTK legislation introduced new complex rules related to target andminimum funded ratios, rolling 10-year recovery plans, indexation, and the use of a theoreticalconstruct called ‘the ultimate forward rate’ in setting liability discount rates.32 We have already noted that there are further more specific operational goals within the primaryreturn-seeking and safety-provision instruments.
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