A Dutch Lesson on Redefining Retirement SolutionsADutchLessononRedefiningRetirementSolutions

Quick Take:

• CIOs can protect purchasing power by including inflation-linked debt and real assets.
• Upgrading systems to manage transition poses operational, regulatory complexities. 
• Greater domestic investment focus driven by geopolitics, diversification.
• De-risking market evolving as longevity reinsurance and pension buy-outs help.

Defined contribution (DC) schemes have seen sustained growth, while defined benefit (DB) plans have been in steady decline for years - a trend expected to persist.¹ Over the next 2.5 years, the largest pension savings system in the EU will undergo a significant shift from DB to DC. 

The transition in the Netherlands brings familiar challenges faced by DC systems globally, including delivering inflation-protected income to participants, addressing the differing administrative complexities of DC versus DB, evaluating the role of illiquid alternative investments within DC structures, and mitigating tail risks, both investment-related and longevity-driven, for pension savers.

Cerulli Associates estimated that Europe’s defined contribution market will record an average growth rate of 6% over the next five years, nearly twice the rate for the rest of the pension industry in the same period.² With nearly two trillion euros ($2.3 trillion) in accrued benefits,³ the transition has significant implications for asset classes. We explore the emerging responses from Dutch CIOs to each of these pressing issues as we witness the transformation of the country’s pension landscape in real time.