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Mid-2001 has seen considerable activity in the Netherlands on the issue of supplementary pensions provision. The government is proposing to make supplementary pension schemes, where they exist, "generally applicable" to all employees. In May, the advisory Social and Economic Council (SER) expressed a negative opinion on this approach. Meanwhile, in April, two members of the Lower House of parliament - both belonging to parties in the ruling coalition - proposed two private members' bills which would go further than the government envisages. Employers would be required to provide minimum supplementary pension rights for all employees. The context is that around 10% of Dutch workers - often women - have no supplementary pensions cover.
Both employers' organisations and trade unions have traditionally regarded supplementary pension schemes for employees - on top of the basic state provision (and not including private pension plans without employer involvement) - as falling under the area of terms of employment and therefore as in their domain (NL9808194F). While acknowledging that the government does have a role to play, they would prefer to see it restricted to those instances in which intervention is absolutely necessary for reasons of public interest. In an opinion issued in 1990 (Pensioenproblematiek, publication No. 90/23), the Social and Economic Council (Sociaal-Economische Raad, SER) - the national advisory body in which both the social partners and independent members participate - defined the problem of the division of responsibilities between the government and social partners in this field. In the view of the SER, the tasks and responsibilities in the area of pensions are divided between the government and social partners on the basis of "mutual obligation". On one hand, employer and employee organisations should accept the government's important role in this area, as well as its task of laying down minimum conditions on the grounds of public interest. On the other hand, government intervention should always be "proportional" and acknowledge the primary responsibility of the social partners for the content, accessibility, implementation and cost of supplementary pensions as an element of the terms and conditions of employment.
This basic assumption that supplementary pension schemes fall under the primacy of the relations between the social partners has long determined the degree of government intervention in this domain. As a general point of departure, supplementary pension legislation has been restricted to the formulation of general guarantees - in the Pensions and Savings Fund Act (Pensioen- en Spaarfondsenwet, PSW) - tax regulations and, on request, the enforcement of a legal obligation to participate in an authorised sectoral pension fund - the Industry-level Pension Fund (Obligatory Participation) Act (Wet verplichte deelneming in een bedrijfstakpensioenfonds, Wet BPf).
Pensions and Savings Fund Act: from minimum guarantees to substantive involvement
The 1952 Pensions and Savings Fund Act (PSW) lays down basic minimum guarantees relating to supplementary pension schemes. It provides that employers making pension commitments to their employees must choose one of a number of options to fulfil these commitments - notably industry-level pension funds and company pension funds. Initially, the operation of the Act was limited to this guarantee function, but over the years more and more substantive provisions have been added to the legislation. The extent to which the perception of the role of the government in this area has evolved is perhaps best reflected by the number of changes made to the PSW over the years. While an occasional, incidental adjustment sufficed in the 1950s and 1960s, more than 20 bills to amend the Act were passed by the Upper and Lower Houses of parliament in the 1990s.
One example of this increasingly substantive government involvement is a recently implemented "flexibilisation" of arrangements for dependant's pensions. As a result of this change in the legislation, supplementary pension funds which guarantee this provision (which is not included as standard in all schemes) are now obliged to offer participants the choice between the dependant's pension option or an increase in their own pension. This addresses the complaint by single people that the level of solidarity required of them by such provisions has "become unreasonable", especially now that, besides married persons, unmarried cohabitees are also eligible for a dependant's pension. This latter development has been set in motion by equal treatment case law from the administrative courts. Ultimately, therefore, the issue was not placed on the agenda or regulated by the social partners, but by the legislature instead. This is just one example of the many substantive elements added to an Act which is in dire need of revision in response to these developments. As stated in the government's recent request to the SER for an opinion on a reform of the PSW (see below), besides being out of date, the Act has also become confusing
Industry-level Pension Fund (Obligatory Participation) Act and the pensions gap
The 1954 Industry-level Pension Fund (Obligatory Participation) Act (Wet BPf) has multiple objectives. The statutory obligation on employees to participate in such sectoral funds where they exist (though in line with the rules governing membership of the schemes) facilitates sector-wide solidarity between all employers and their employees. This makes the regulation an effective measure against the potential gap (referred to as a witte vlekor "white spot") in the area of supplementary pension schemes - namely the existence of paid employment which does not accrue supplementary pension rights. Furthermore, the Act is designed to prevent pensions, as part of the terms of employment, from becoming the subject of competition between companies.
The success of the statutory participation obligation is perhaps best illustrated by the extent to which the desired coverage has been realised: in 1996, more than 90% of all employees were members of a supplementary pension scheme. In other words, under 10% (9.2% in 1996) of all employees carried out paid labour without accruing associated pension rights. All parties involved in supplementary pensions are are keen to find solutions to the problem of the missing 10%. The parties are unanimous that something has to be done; the main issue of debate is under whose responsibility this should take place.
A possible reason for the supplementary pensions gap is that sector or company schemes may imposes conditions for employees to join, such as age or length of service. A sector or company may even offer no pension scheme whatsoever, a situation that, despite all pensions legislation, is still possible. The existing supplementary pensions legislation applies only to situations in which such pension provision exists - other instances are not covered by the Act.
The problem is particularly important when regarded in the light of another government objective: to improve the pension position of women, who for a host of reasons have lagged far behind men in this respect. Research has shown that the supplementary pensions gap is gender-based to a high degree: relatively more women than men occupy jobs to which no supplementary pension rights are linked. This is also one of the reasons why the government has pledged to pay special attention to the problem of supplementary pension coverage and, some four years ago, it expressed the intention to introduce a mandatory provision with the objective of curbing paid employment without pension rights, entirely if possible.
New initiatives
On 2 May 2000, the government issued to the SER a request for its opinion on the revision of the PSW legislation. In the request, the government set out its vision of how best to tackle the problem of paid employment which does not accrue supplementary pension rights. It is thinking along the lines of a statutory provision that would make an existing company or sector supplementary pension schemes "generally applicable". This would mean that no exclusions from membership would be permitted, except on a limited number of strictly specified grounds. This should eradicate the problem of "flexi-workers" who, on grounds of the flexible nature of their employment, may have been denied admittance to the supplementary pension scheme for permanent staff. Exclusions from schemes on the grounds of low pay, age or job grade would also be ruled out under this principle of general applicability.
Employers without a pension scheme, however, would remain beyond the scope of the law, as the general applicability principle would not imply that employers were obliged to grant pension rights. While having considered the option of a legal pension obligation for all employees in the past, the government has ultimately decided on another approach on this occasion. Technically, such a measure to combat the gaps in coverage would be feasible, says the State Secretary for Social Affairs and Employment, but it is too great an encroachment in the division of responsibilities applicable between the government and social partners (quoted in Kamerstukken II, 1999/2000, no. 6).
This opinion is not shared by all. On 11 April 2001, two members of the Lower House of parliament belonging to parties the ruling coalition - Arthie Schimmel of the social liberal Democraten 66 (D66) and Staf Depla of the social democratic Labour Party (Partij van de Arbeid, PvdA) - caused a stir by launching two private members' bills under the heading "an inflation-proof pension for every employee". They proposed: a Minimum Pension Act (Wet minimumpensioen) laying down a minimum supplementary pension scheme to be provided by employers for all employees; and a Protection of Purchasing Power (Pensions) Regulation (Regeling koopkrachtbescherming pensioenen), providing for the protection of the purchasing power of current supplementary pensions, in cases where this protection has not been (adequately) arranged. Both proposals are aimed at strengthening the position of employees who are inadequately protected under the current pension system, and the statutory supplementary pension obligation rejected by the government is at the heart of the minimum pensions proposal.
In the explanatory memorandum accompanying their minimum pensions bill, Ms Schimmel and Mr Depla explain why they have opted for proposing a pension obligation, and why they did not wish to wait until the SER had published its anticipated opinion on the proposed new pension legislation. They refer to an earlier gender equality report, which concluded that, of all measures, a prohibition on exclusions from supplementary schemes would make the greatest contribution to the establishment of a gender-neutral pension system. According to the explanatory memorandum, such a prohibition would be highly effective in ensuring that the continuing flexibilisation of the labour market does not lead to the enlargement of pension coverage gaps. The general applicability rule proposed by the government falls short in this respect. What is more, updating the PSW will prove to be an extremely complex operation, and might therefore take many years to complete, time that the proposers of the bill do not want to see wasted. After all, says the explanatory memorandum, there is a well-established social consensus on the desire to clear up the grey areas and gaps in the accrual of pensions. Any further time loss would therefore lead to an unnecessary increase in the number of employees who, on reaching retirement age, will have been unable to accrue sufficient pension rights.
It is not clear whether the bill's initiators were at all familiar with the contents of the SER's opinion released only shortly afterwards, but the publication of this opinion on 18 May 2001 clearly demonstrates how divided opinions are on this issue. The SER, in which the social partners hold a two-thirds majority, rejects the relatively moderate government proposal of statutory general application of supplementary pension schemes with the argument that the gap in pension provisions should not be tackled through legislation, but rather within the framework of consultation and bargaining on terms and conditions of employment among the social partners. The proposal to establish minimum supplementary pension rights is also rejected on grounds that this is not compatible with the status quo in the division of responsibilities between the government and social partners.
Commentary
The issue of whether or not the legislature should intervene in the Netherlands' apparently flawed supplementary pension provision can be approached from three different perspectives:
- in the view of the social partners, who enjoy the support of the tripartite SER in this respect, the government has no role to play as yet - the "white spot" problem should be tackled resolutely by internal measures and existing deficiencies are not serious enough to warrant mandatory legislation;
- the moderate intervention policy adopted by the government would lead to a legal prohibition of the exclusion of employees from participation in existing pension schemes; and
- the latest and more radical approach, as pursued by the initiators of the private members' bill, provides for a statutory supplementary pension obligation for all employers, thus including the few who do not offer the accrual of such pension rights to their employees as part of their standard employment conditions.
Most remarkably perhaps, these three distinct variants do not lead to significant differences with respect to actual pension accrual. Professor PMC de Lange, a specialist in pensions, has pointed out that legislation relevant to pensions already contains so many mandatory provisions that the step to a general supplementary pension obligation is in fact quite a small step. Furthermore, the group of employees currently without supplementary pension coverage is relatively small and the costs of inclusion are correspondingly modest. This justifies incomprehension as to the fervent objections raised over a new regulation aimed at removing those last "blind spots" that apparently cannot be reached by the social partners. All the more so if one takes into consideration the fact that, while the problem is relatively modest in scale, it gives rise to a serious disadvantage for the employees involved, especially as exclusion is most common at the lowest levels of the labour market.
The most likely explanation is that the conflict with respect to the solution to the problem does not really concern the substantive aspects of pensions, but instead revolves around the fundamental question of who actually "owns" supplementary pensions. This does not mean that the discussion is about whether the pension capital belongs to the employer, the pension fund or the participant, but whether final control lies in the hands of the government, as guardian of the public interest, or with the social partners, who bear ultimate responsibility for consultation and bargaining on terms and conditions of employment. As such, the approaching conflict between the social and political partners underlines the earlier observation by the SER (in its 1990 opinion on pension issues) that the distinction in tasks and responsibilities which has arisen over the years with respect to this aspect of employment conditions is "not of an absolute nature" - in other words, it "is unclear." (Mies Westerveld, HSI).