The Dutch government's plans to improve inflation protection under the Future of Pensions Act (Wtp) have come under fire, as Achmea argued that lasting improvements in retirees’ purchasing power require a "bigger slice of the pie".

Dutch Minister of Social Affairs and Employment, Mariëlle Paul, said that the five initial options will be further updated in the coming months to consider both numerical data and broader impacts, with several parties set to provide input.

However, Achmea actuary, Arno van Mullekom, raised concerns over the initial options, and argued that, actually, the purchasing power problem could have been solved more effectively under the existing Financial Assessment Framework (FTK), which supports strategic investments and intergenerational risk sharing.

"The funny thing is that the FTK can actually offer a very simple solution. On the one hand, it involves establishing a strategic investment mix with a sufficiently high expected return to achieve a realistic ambition," he stated.

"And on the other hand, it involves arranging sound intergenerational risk sharing and solidarity between retirees and working people."

He noted, however, that at the time there was insufficient support to lower buffer requirements and adopt a less strict actuarial interest rate.

In his update, Van Mullekom expressed specific concerns about each of the WTP variants and their ability to provide lasting improvements.

For the first variant, which is focused on real protective returns, Van Mullekom noted that while it helps retirees keep up with inflation, it does so by passing more risk and uncertainty onto younger generations.

Van Mullekom also raised concerns about the second variant, which changes how pension funds calculate their expected returns, as this could see retirees receive higher benefits more quickly, but at the expense of future benefits, resulting in no structural improvement in the value of the money.

In addition to this, he flagged that the variant suggesting using reserves to cover inflation for current pensioners is that younger generations are left with less as a result.

He also said that the fourth variant tried to match pensions exactly to inflation, but that drained reserves fast, making the system fragile and putting stress on the collective.

Van Mullekom highlighted that taking on higher investment risk combined with intergenerational risk sharing, as proposed in variant five, could create opportunities, but it also means that younger participants bear the extra risk.

He described this variant as “offering the best chances” for growth and said it is “exciting” to see whether all generations will receive a fair balance of costs and benefits, for example, through the solidarity reserve.

While he stressed that further analysis is needed to determine its effectiveness, he was cautious given the challenges of an ageing population.

Variant five is only possible under the solidarity-based contribution scheme.

---