The pensions are threatened from many sides

As president of De Nederlandsche Bank and director of the European Central Bank, Klaas Knot finds himself in a strange dilemma. Whose interest is he really standing up for? (Photo: World Economic Forum via Flickr, CC-BY-NC-SA-2.0)


Pension is a hot topic. It’s been that way for a while. They are under fire from the EU, from the monetary policy of the European Central Bank, but strangely enough also because of the interference of the regulator, De Nederlandsche Bank (DNB).

Gradual acquisition

With a successful pension petition from 2017, Culture under Fire has put the threat that the EU poses to our pension funds on the agenda: together they amount to the enormous sum of 1,500 billion euros. A threat that proceeds through gradual appropriation or because the money is gradually transferred to other countries via transfer union or ‘aid funds’. Because that’s what it’s all about when European countries collect their debts, that is, lump them together.

Bumbling inflation

Another threat to pensions comes from the EU, which Culture under Fire has also signaled more than once on this page: The one about low interest rates and money creation (by running the money press) from the European Central Bank (ECB). ), which together have led to the fact that we are now faced with raging inflation, which especially affects those who have long had non-indexed pensions. For Christine Lagarde, the current director of the ECB, to pretend to be surprised is sheer travesty. In any case, if you nominally get your promised pension but can buy much less for it, you are still being robbed.

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Pieter Omtzigt warns

The pensions are also receiving extra attention because the government is about to place them in a new system. Pieter Omtzigt, a specialist in this field, warns against this insistence. The operation is far-reaching, while the case is extremely complex and expertise in parliament is limited. Omtzigt has said emphatically that he foresees numerous accidents where people fall between two chairs. For example, people may simply lose the right to a partner’s pension, even if they have always paid contributions under that condition. No matter how you shape this legally, it directly affects their private property. A pension is, after all, “deferred salary”.

Pension supervision DNB is only newer

As if all that wasn’t enough, another Pieter, Pieter Lakeman, has filed a pensions lawsuit against De Nederlandsche Bank (DNB) on behalf of his Stichting Onderzoek Bedrijfsinformatie (SOBI) on pensions. More on that later. As you know, as chairman of DNB, Klaas Knot is the supervisor of pensions. Culture under Fire has even dedicated a successful billboard campaign to this. DNB’s supervision of pensions originates from a more recent date and fits the picture of a dilution of what a central bank’s core task should be: to ensure financial stability as an independent institution. But that independence itself has also faded, which is reflected in the fact that the president of DNB automatically has a seat on the board of the European Central Bank. The current president, Klaas Knot, has explicitly stated that he is there for the European interest and not for the Dutch. How can you reconcile that division with your first task: ensuring the nation’s financial stability? It is also in accordance with the Banking Act of 1998, which focuses DNB entirely on the EU and no longer mentions the national interest.

Actuarial interest is calculated carefully

Let’s just say nothing about the fact that, according to its website, DNB is also concerned about its own ‘greening’, as if it has nothing better to do. This also indicates a loss of focus. Be that as it may, DNB has been the supervisor of pensions since 2004 and as such, under Knot’s management, prescribes the actuarial interest rate for the pension funds. It is the factor by which the funds calculate how much they need to have in cash (and therefore cannot pay out) to meet future obligations. Please note that the actuarial interest rate is not a guess, but is determined very carefully and ‘safely’. However, the funds are tied to it.

The EU, hands over our pensions

Pension funds “filling with money”

The higher the discount rate, the more interest income the pension funds can expect in the future. The less they reasonably need to have in cash and the more they are able to maintain the level of pension payments. Lakeman, supported by a number of older unions, now accuses DNB of keeping the actuarial interest rate far too low (a concrete example: an actuarial interest rate of 0.59% with an average investment return over ten years of 8.2%) and therefore the pension funds , who, he says, have been forced to sit on their money instead of paying out. Many experts agree. In addition, DNB has made the funds primarily invest in low-interest government bonds instead of shares. As a result of all this, pensioners are disadvantaged in what is legally theirs: a pension that remains as stable in value as possible.

Erroneously not indexed for 14 years

Interestingly, given DNB’s European orientation, Lakeman accuses the central bank of forcing pension funds to violate a European pension directive (IORP II). This guidance prescribes that the expected return on investment must be taken into account. According to Lakeman, no other central bank acts like DNB. “By making its incorrect assumptions mandatory, DNB creates the impression that full indexing would be irresponsible,” Lakeman said. “The reality is that it is actually possible and that payers and recipients of pension benefits are shortchanged by 200 pension funds (but actually by DNB). If the case were to be won, according to him, it would be established that the Dutch government and DNB had applied the European pension directive incorrectly for years. Most pension funds have mistakenly not indexed workers’ pension benefits and pension accruals for 14 consecutive years.

Subsidiarity principle violated

The problem that Lakeman raises is part of a wider problem, namely this: Is it even desirable that DNB intervenes in pensions since 2004, even so severely as to violate the principle of subsidiarity? The name of this principle is derived from a Latin word meaning “help”. The idea is that each level of an organization should do its own work (which it is usually most expert at), and the higher level should only offer help where the lower level cannot do it alone. This serves not only efficiency, but also justice and freedom. You should not want to fill in the work of others from above, but allow each level its own freedom of action. Remember that when it comes to DNB and the pension funds, we are not even talking about a corporate hierarchy, but about supervision. That in itself presupposes a considerable degree of distance.

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Knot himself is a politically pressured appointment

In practice, however, this ‘supervision’ has proven to be coercive. For DNB, it not only ensures that the pension funds can fulfill their obligations (where the question is – Lakeman’s point – to what extent DNB, as a non-specialist, assesses this properly and applies the right criteria for this), but also about the way the pension funds make their investments on, and even whether the fund’s directors are competent enough. If desired, DNB can lead the recruitment of new directors. Interesting if we remember that the appointment of Klaas Knot himself in 2011 was a political appointment pushed through by Prime Minister Rutte, which resulted in the DNB nominated candidate missing out on Lex Hoogduin.

DNB has directors on standby

This supervision by DNB of candidate directors of pension funds also goes very far. According to pension expert Rob de Brouwer, no one knows exactly how the assessment works. But not only knowledge and experience count, but also a psychological assessment. And “it is certain that approval from DNB is not a formality”, says De Brouwer. With a view to the future, this means that both directors and director candidates adopt a submissive attitude towards DNB at the expense of their actual task: To manage the relevant pension fund as best as possible. They are careful, because if you take a position that is unfavorable to DNB, it could cost you your position. Or makes a later position impossible. Specific cases of this are known. But even once a board has been formed, it is not free from DNB, because the central bank also scrutinizes the fund’s investment policy and risk management. In fact, the pension funds are under permanent guardianship at DNB. This makes DNB largely co-responsible for the policy pursued and the profitability of the pension funds’ investments (or the lack thereof).

Numerous threats continue

That’s exactly where Lakeman steps in. We will soon find out what the court thinks about this and whether pensioners will be compensated for the loss they have suffered in DNB. But in any case, it is clear that pensions are far less secure than the Dutch citizen with the ‘world’s best pension system’ has long been led to believe. And that even if Lakeman is proved right, many other threats, especially from the EU, will continue to exist.

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