Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-10T10:43:17.730Z Has data issue: false hasContentIssue false
  • English
  • Français

An analysis of the Dutch-style pension plans proposed by UK policy-makers

Published online by Cambridge University Press:  06 April 2021

IQBAL OWADALLY Open the ORCID record for IQBAL OWADALLY [Opens in a new window] ,
RAHIL RAM  and
LUCA REGIS Open the ORCID record for LUCA REGIS [Opens in a new window]
IQBAL OWADALLY
Affiliation:
Cass Business School, City, University of London, London, UK e-mail: iqbal@city.ac.uk
RAHIL RAM
Affiliation:
Fulcrum Asset Management LLP, London, UK e-mail: rahil.ram@fulcrumasset.com
LUCA REGIS
Affiliation:
Department of Socio-Economic and Mathematical-Statistical Sciences, University of Torin and Collegio Carlo Alberto, Turin, Italy e-mail: luca.regis@unito.it
Get access Rights & Permissions [Opens in a new window]

Abstract

Collective Defined Contribution (CDC) pension schemes are a variant of collective pension plans that are present in many countries and especially common in the Netherlands. CDC schemes are based on the pooled management of the retirement savings of all members, thereby incorporating inter-generational risk-sharing features. Employers are not subject to investment and longevity risks as these are transferred to plan members collectively. In this paper, we discuss policy related to the proposed introduction of CDC schemes to the UK. By means of a simulation-based study, we compare the performance of CDC schemes vis-à-vis typical Defined Contribution schemes under different investment strategies. We find that CDC schemes may provide retirees with a higher income replacement rate on average, together with less uncertainty.

Keywords

Collective pension schemesDutch pensionsrisk-sharing mechanismssimulations
Type
Article
Information
Journal of Social Policy , Volume 51 , Issue 2 , April 2022 , pp. 325 - 345
Copyright
© The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aitken, W. (2014), Collective pensions are no magic wand.Google Scholar
Alserda, G. A., Bikker, J. A. and Van Der Lecq, F. S. (2018), X-efficiency and economies of scale in pension fund administration and investment. Applied Economics, 50 (48), 5164–5188.CrossRefGoogle Scholar
Barclays Bank (2016), Equity gilt study 2016. Technical report, Barclays Bank.Google Scholar
Bikker, J. A. and De Dreu, J. (2009), Operating costs of pension funds: the impact of scale, governance. and plan design. Journal of Pension Economics & Finance, 8 (1), 63–89.CrossRefGoogle Scholar
Bikker, J. A., Steenbeek, O. W. and Torracchi, F. (2012), The Impact of Scale, Complexity. and Service Quality on the Administrative Costs of Pension Funds: A Cross-Country Comparison. Journal of Risk and Insurance, 79(2), 477–514.CrossRefGoogle Scholar
Blake, D. (2016), We need a national narrative: building a consensus around retirement income. Technical report, Independent Review of Retirement Incomes.CrossRefGoogle Scholar
Bonenkamp, J., Meijdam, A., Ponds, E. and Westerhout, E. (2014), Reinventing intergenerational risk sharing. Netspar Panel Paper 40.Google Scholar
Bonenkamp, J., Meijdam, A., Ponds, E. and Westerhout, E. (2017), Ageing-driven pension reforms. Journal of Population Economics 30(3), 953–976.CrossRefGoogle Scholar
Bovenberg, L. and Nijman, T. (2009), Developments in pension reform: the case of Dutch stand-alone collective pension schemes. International Tax and Public Finance 16(4), 443–467.CrossRefGoogle Scholar
Bridgen, P. (2019), Financialisation and social protection? The UK’s path towards a socially protective public-private pension system, in Heins, E., Needham, C. and Rees, J. (eds.), Analysis and Debate in Social Policy, Social Policy Review 31, 47–70.Google Scholar
Bridgen, P. and Meyer, T. (2007), Private pensions versus social inclusion? Three patterns of provision and their impact., in Meyer, T., Bridgen, P. and Riedmuller, B. (Eds.), Private pensions versus social inclusion? Non-state provision for citizens at risk in Europe, Cheltenham: Edward Elgar, 3–43.Google Scholar
Broeders, D. W., van Oord, A. and Rijsbergen, D. R. (2016), Scale economies in pension fund investments: A dissection of investment costs across asset classes. Journal of International Money and Finance, 67, 147–171.CrossRefGoogle Scholar
Chen, D. and Beetsma, R. M. (2015), Mandatory participation in occupational pension schemes in the Netherlands and other countries. an update. Technical Report DP 10/2015-032, Netspar.CrossRefGoogle Scholar
Chen, D. H., Beetsma, R. M., Broeders, D. W. and Pelsser, A. A. (2017), Sustainability of participation in collective pension schemes: An option pricing approach. Insurance: Mathematics and Economics 74, 182–196.Google Scholar
Chen, D. H., Beetsma, R. M., Ponds, E. H. and Romp, W. E. (2016), Intergenerational risk-sharing through funded pensions and public debt. Journal of Pension Economics & Finance 15(2), 127–159.CrossRefGoogle Scholar
Clark, G. L. and Monk, A. H. (2006), The crisis in defined benefit corporate pension liabilities Part I: Scope of the problem. Pensions: An International Journal 12(1), 43–54.CrossRefGoogle Scholar
Collie, B. (2012), The SCG standard cash flow generator. Technical report, Russell Investments.Google Scholar
Conrad, H. (2012), Economic system and welfare regime dynamics in Japan since the early 2000s – the case of occupational pensions. Journal of Social Policy 41(1), 119–140.CrossRefGoogle Scholar
Cowling, C., Fisher, H., Powe, K., Sheth, J. and Wright, M. (2017), Funding defined benefit pension schemes: An integrated risk management approach. Sessional Paper Institute and Faculty of Actuaries.Google Scholar
Cui, J., De Jong, F. and Ponds, E. (2011), Intergenerational risk-sharing within funded pension schemes. Journal of Pension Economics & Finance 10(1), 1–29.CrossRefGoogle Scholar
Haan, J., Lekniute, Z. and Ponds, E. H. (2015), Pension Contracts and Risk Sharing–A Level Playing Field Comparison, SSRN 2741542.CrossRefGoogle Scholar
Department for Work and Pensions (2009), Modelling Collective Defined Contribution schemes. Technical report, UK Government Department for Work and Pensions.Google Scholar
Fernandez, J. J. (2012), Explaining the introduction of automatic pension indexation provisions in 17 OECD countries, 1945–2000. Journal of European Social Policy 22(3), 241–258.CrossRefGoogle Scholar
Foster, L. (2018), Active ageing, pensions and retirement in the UK. Journal of population ageing 11(2), 117–132.CrossRefGoogle ScholarPubMed
Frericks, P. (2013), Strengthening market principles in welfare institutions: How hybrid pension systems impact on social-risk spreading. Journal of Social Policy 42(4), 665–683.CrossRefGoogle Scholar
Gollier, C. (2008), Intergenerational risk-sharing and risk-taking of a pension fund. Journal of Public Economics 92(5-6), 1463–1485.CrossRefGoogle Scholar
Inkmann, J., Lopes, P. and Michaelides, A. (2010), How deep is the annuity market participation puzzle? The Review of Financial Studies, 24(1), 279–319.CrossRefGoogle Scholar
Jaime-Castillo, A. M. (2013), Public opinion and the reform of the pension systems in Europe: The influence of solidarity principles. Journal of European Social Policy 23(4), 390–405.CrossRefGoogle Scholar
Keohane, N., Evans, K. and Richards, B. (2015), Golden years? what freedom and choice will mean for UK pensioners. Technical report, Social Market Foundation.Google Scholar
Lewin, C. and Sweeney, E. (2007), Deregulatory Review of Private Pensions: an independent report to the Department for Work and Pensions.Google Scholar
Lurie, L. (2018), Pension privatisation: Benefits and costs. Industrial Law Journal, 47(3), 399–430.CrossRefGoogle Scholar
Olivera, J. and Ponomarenko, V. (2017), Pension insecurity and wellbeing in europe. Journal of Social Policy 46(3), 517–542.CrossRefGoogle Scholar
Thurley, D. and Davies, J. M. (2020), Collective Defined Contribution Schemes, Briefing Paper CBP 8674, House of Commons Library.Google Scholar
The Pensions Regulator (2020), The DB Landscape.Google Scholar
Van Binsbergen, J. H., Broeders, D., De Jong, M. and Koijen, R. S. (2014), Collective pension schemes and individual choice. Journal of Pension Economics & Finance 13(2), 210–225.CrossRefGoogle Scholar
Wesbroom, K., Hardern, D., Arends, M. and Harding, A. (2013), The case for collective DC. Technical report, Aon Hewitt, London, UK.Google Scholar