Amsterdam, May 20 2010 Dutch pension system Tomas Wijffels

1. Amsterdam, May 20 2010 Dutch pension system Tomas Wijffels Dutch Association of Industry-wide Pension Funds

2. Contents • Dutch 3 pillar pension system • Regulation • Pension funds • Type of pension schemes • Low costs of pension funds

3. Dutch 3 pillar system • 1st pillar: State pension pay-as-you-go • 2nd pillar: Occupational pension funded • 3rd pillar: Individual annuities funded

4. 3 pillar system- 1st pillar state pension • Based on residence. Full pension when one lived in the Netherlands from 15-65 years. Work history is of no importance. • Height of state pension: • Single app. 9.100 euro a year • Couple app. 13.000 euro a year • Average salary in the Netherlands is 31.000 euro a year • Pay-as-you-go • Contribution is 18% of first 32.000 euro

5. 3 pillar system - 2nd pillar occupational pension • Height of pension related to salary and work history. Mainly defined benefit (DB) schemes with conditional indexation. • Pension funds are fully funded. • Contribution is paid by both employer and employee. For the average employee total contribution is app. 10% of salary. • 2nd pillar pension is supplement of (in average) 5.000 euro to state pension. This supplement will increase in future

6. 3 pillar system - 3rd pillar individual annuities • Necessary for self employed people • Mainly DC, often in combination with minimum return • Obligation by law to buy annuity at retirement age

7. Regulation (1) – Highlights pension act • Pension fund is legal entity, separated from sponsoring companies. In case of bankruptcy, pension savings are save. • Management by social partners • Pension fund is not-fot-profit foundation • Funded system: minimum funding level is 105% of liabilities (regulated by financial assessment framework)

8. Regulation (2) - Mandatory participation • Social partners may ask the minister of social affairs to arrange mandatory participation. • All companies in that specific industry should join Industry Wide Pension Fund, or have their own company pension fund (with comparable results) • Because of this, 93% of all employees save for occupational pension!

9. Regulation (3) - Asset allocation • Most funds have equity, government bonds and real estate. Some pension funds have also hedge funds, private equity and commodities. • Typical allocation: • 40% equity • 50% bonds • 10% real estate, hedge funds, commodities • Company pension funds are aloud (by law) to invest maximum 5% of their assets in the sponsoring company.

10. Pension funds (1) - Types of pension funds • Industry wide pension funds • 82 • Metal sector, health and care, civil servants, truck drivers, etc. • Company pension funds • Ca. 500 • Shell, Philips, Unilever etc. • Professional pension funds • 11 • Notaries, doctors, physiotherapists etc.

11. Pension funds (2) - Governance • Pension fund is not-for-profit foundation • Paritarian Board of Trustees (BoT) • Industry wide pension funds • 50% emloyer organisations • 50% employees organisation (labour union) • Company pension fund • 50% employer of company • 50% employees of copmpany • Pensioners may participate in BoT

12. Pension fund (3) - administration • Most pension funds do not manage own administration • Administration offices are commercial companies who carry out pension administration and asset management • APG, Mn Services, PGGM, Syntrus Achmea • Some of these work for 50 pension funds • May work for foreign pension funds

13. Pension funds (4) – Different pension agreements • Defined Benefit vs. Defined Contribution …and, • All kind of hybrid schemes • Who bears the risks, employer or employee • Final salary or average salary scheme • Conditional indexation • Basis of DB, part DC, for instance salary above 45.000 euro

14. DB final pay Risk employer DB mitigated final pay DB average pay DB average pay with ceiling CDC - Collective DC DC individual Risk employee

15. Pension funds (5) - Figures and numbers • 600 pension funds • Amount of participants varies from 50 to 1.200.000 per pension fund. Assets from few million to 200 billion euro. • Approximately 700 billion euro pension assets (GDP Netherlands 550bn) • Total contribution app. 25 billion euro • Total pension payment 20 billion (2nd pillar)

16. Costs of pension funds (1) • Research of Dutch Central Bank (supervisor)

17. Costs of pension funds (2) • Due to mandatory participation, pension funds do not have marketing costs • Due to mandatory participation most pension funds are relatively big (high amount of participant and pensioners) • Pension funds do not have any shareholders who demand return on investment

18. Costs of pension funds (3)Yearly costs per participant

19. Summary Dutch pension system • Flate rate state pension (social minimum) • 2nd pillar occupational pension well developed • Fully funded • Coverage of 93% of employees • Sustainable to ageing society • Collective pension systems offer more value to lower costs. • Due to mandatory participation pension funds may have thousands of participants • Pension funds are not-for-profit

20. VB The Dutch Association of Industry-wide Pension Funds (Vereniging van Bedrijfstakpensioenfondsen, VB) promotes, in the broadest sense of the word, the common interests of almost all such funds in the Netherlands. The 82 member-funds are representing more than 75% of the Netherlands employees participating in pension schemes. The VB represents the pension interests of almost 4.7 million employees, 1.2 million pensioners and 6.8 million persons with deferred pension rights. The united assets of the involved pension funds amount to approximately 500 billion euro's (end of 2008) More information: www.vb.nl