Dutch pension funds could play a larger role in financing small and medium-sized enterprises (SMEs), according to the OECD.

Its OECD Economic Surveys: Netherlands 2025 noted that a lack of strong capital markets in the Netherlands currently limits funds for high-risk, large-scale investments, which has led to an exodus of innovative companies from the country. Many of those relocate to the US for better financing options, the report stated.

It highlighted that underdeveloped capital markets reveal a “lack of deeper pools of long-term capital provided by institutional investors”.

“Dutch pension funds in particular could play a larger role in SME financing, as they manage substantial assets totalling €1,568bn by the end of 2024,” the report said.

It continued: “Despite being among the largest pension investors in the European Union, both in absolute terms and relative to gross domestic product (GDP), Dutch pension funds allocate relatively little capital domestically.”

The OECD, therefore, welcomed the Dutch government’s commitment to the development of the EU’s Capital Markets Union (CMU), which could help address a lack of scale and allow SMEs to access a more diverse range of funding sources.

The Netherlands, it said, should continue developing its domestic capital market whilst also “actively advocating” for a European CMU at the EU level.

It argued that reducing barriers to cross-border investment and investment in national capital markets could help shift pension fund investment to Europe and the Netherland by “reducing capital costs for firms, making capital markets more attractive for European firms who want to raise money, and offering pension funds some alternatives for equity investment to markets abroad”.

Furthermore, the report acknowledged the Dutch pension reform, which is to be completed by 1 January 2028, and will see all schemes move from a defined benefit-style scheme to a defined contribution-style scheme.

In terms of the reform’s impact on investment, the OECD warned of the “complexities” that need to be managed.

“While this is a welcomed development that will help improve their sustainability in the longer term, the transition and potential complexities need to be managed carefully by De Nederlandsche Bank (DNB) and the Dutch Authority for Financial Markets (AFM).

“The transition involves accrued benefits of over €1.5trn, which could create short-term volatility in financial markets if pension funds shift their investment strategies from government bonds to riskier asset classes.”

On a positive note, the OECD praised the Netherlands, which has one of the largest pension systems in the world, for having lower pension-related fiscal pressures than many other advanced economies. This, it said, is because its retirement age is linked to life expectancy and “thanks to the large fully funded second-pillar pension system”.

However, it warned that long-term demographic shifts may still put pressure on pension adequacy and require further adjustments, especially for lower-income retirees.

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