Jacqueline Lommen, pension supervisor at De Nederlandsche Bank
Ms. Lommen, what is the system of pension insurance in your country and which are the specific pension insurance practices?
In The Netherlands, a very well-developed and sizeable pensions system exist, with a history dating back to 1952. The three pillar system is in place. It includes a basic, state-organised, PAYG
first pillar, supplemented by a “mandatory” privately managed, capital-funded, employment-related second pillar. In addition, individual, private pension savings can be made via life insurance
companies and annuities. As a result, pension savings are voluminous (at 120% of GDP) and the replacement rate (70% of final salary on average) and coverage ratio (96% of all employees) are
high.
What are the public feelings about the private occupational pension schemes in your country?
The second pillar, private, occupational pension schemes are the essential and most important part of pension provisions in The Netherlands. There is broad support for these schemes from all parts
and layers of the society.
Currently, the systems is being challenged by trends away from DB schemes towards DC schemes. This trend is triggered by the increasing costs involved in DB schemes, the new IFRS accounting
standards and the drive towards individuality and less solidarity in the Dutch society in general. A new kind of schemes has been developed, combining the security-for-scheme-member elements of DB
schemes with the fixed-costs-for-the-plan-sponsors elements of DC schemmes: “Collective DC”.
Which, in your opinion, are the major challenges facing the European pension systems in the context of the modern realities?
a. The European pension systems are coping with major challenges. The prime challenge, obviously, relates to the ageing of the population and the threat this puts on the
traditional PAYG system. As a solution, supplementary, privately financed, capital-funded pension savings systems are essential to offer sufficient old-age benefits.
b. In addition, the European pension systems are challenged by the EU integration process. The IORP Directive is a fist step towards the convergence of local pension systems within the EU Member States, leading to many regulatory issues at local level. The next step will be supervisory convergence and the building of an EU-wide prudential framework (funding and solvency requirements), creating a level-playing field in the EU and preventing averse and undesirable regulatory arbitrage of IORPs between EU Member states.
c. A third challenge for the European pension systems is to keep the right balance between pensions as a social security provision, based on collectivity and solidarity, and pensions as a financial product, based on individual freedom and market competition. A combination of both kinds of pension provisions is desirable, protecting those who need support and guidance and offering sufficient financial room for manoeuvre for those who can bear the risks involved.
d. A fourth challenge stems from the need to stimulate labour mobility and cross-border activities within the EU internal market. Well-arranged pension provisions are an
important part of people´s incentive to move to other EU member states. Multinational companies have to be facilitated in building sufficient and simple (absence of “red tape”) pensions provisions
for their mobile workers. Pension rights have to be vested and to be portable across borders, in order to guarantee adequate pension provisions for the individual
expat.
In what aspect must the reforms be carried out?
The CEIOPS Occupational Pensions Committee (OPC) is playing a key role in creating more convergence in the emerging European pension market, in a smooth, constructive and effective way. The CEIOPS
OPC is involved in setting up an EU-wide prudential framework in the long run, in assessing and improving the IORP Directive, in dealing with the operational issues of cross-border pensions and in
sharing best practices and creating a mutual background.
Which are the major challenges facing the pension insurance systems of the EU acceding countries, among which is also Bulgaria?
Following up on item c. above, the major
challenge for pension insurance systems of the EU acceding countries is to find the right balance between protecting those individuals who need support and guidance and offering sufficient
financial room for manoeuvre to those who can assess and bear the risks involved. This delicate equilibrium is for instance at stake in setting the individual investment strategy options in the
Pillar 1b mandatory occupational pension schemes (World bank model).
Jacqueline Lommen is pension supervisor at De Nederlandsche Bank (DNB). She is a member of the CEIOPS Occupational Pensions Committee, the new EU pension supervisors body, which is amongst
others is dealing with the implementation of the IORP Directive, the drafting of the Budapest Protocol, the creation of a prudential supervisory framework and the day-to-day supervision of
cross-border operating IORPs. She is also closely involved in the “Nederland Pensioenland” project, which focuses on the active positioning of The Netherlands in the emerging pan-European pension
market.
Before joining the Dutch pension regulator, she was for many years dedicated to business development in the private pension industry, mainly at AEGON NV. She was actively involved in EU public
affairs, namely with the EFR (The Roundtable for financial services providers) and the FSAP review of the European Commission.
Jacqueline has a background in asset management and studied macroeconomics and business at Tilburg University in The Netherlands and Indiana University in the US.
