Rise and Evolution of Pension Systems in Netherlands Essay

In this chapter is discussed how the Dutch pension system is structured. Furthermore, a account will be given sing how pensions are build up and monitored by the jurisprudence.

This chapter will besides supply an penetration in the pension accounting before and after the acceptance of IFRS. To reason I will discussed the impact of the fiscal crisis on the Dutch pension financess.

2.1 The Dutch Pension system.

The Dutch pension system is a three pillar system and it is based on a combination of capital funded and pay as you go schemes. This three pillars together determine the old age pension sum one will have when one retired. The first pillar is the basic province pension, this is a mandatory corporate pension called AOW. The province pension is an income for everyone who reach the age of 65 or is older than 65 old ages.

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The 2nd pillar is the auxiliary pension strategies which an employee can construct up via the employer. The pension parts typically shared between employers and employees. The employer sets the pension duties in a pension fund or an insurance company. The intent of the auxiliary pension strategy is to hold an income to one ‘s disposal which are related to the wage during the on the job life. This auxiliary pension can be based on the concluding wage strategy or the calling mean strategy. earned salary during the employment period.

The concluding wage strategy is a pension strategy in which the sum of the pension is derived from the last earned wage. By a salary addition the already construct up pension will be raise to the new wage. The lost pension parts caused by the salary addition must be paid by the employer in order to keep the proper pension benefit, this is called back service costs. The calling mean strategy is a pension strategy based on the norm earned salary during the employment period.

After an employee have retired at the terminal of his working life, he will have his nominal pension rights and the refering indexation for rising prices compensation.

In the Netherlands do pension financess manage the bulk of the built pension assets, insurance companies merely manage a little portion. In the Netherlands there a three type of pension financess[ 1 ]

Industry- broad pension financess ;

Corporate pension financess

Pension financess for independent professional groups

Industry- broad pension financess do pull off the pension assets based on understanding made between the employers of one industry.

When companies do hold their ain pension fund we talk about corporate pension financess. Even though the corporate pension fund does has strong ties with the company, it is an independent legal entity that are n’t portion of the company. Harmonizing to the pension act the pension fund ca n’t be apt for debts of the company and will therefore non be affected.

Pension financess for independent professional groups manage the pension strategies based on

on an understanding between the independent professionals and with a certain business such as tooth doctors.

The 3rd pillar consists of voluntary occupational pension strategy. Everyone does has the option to supplement their pension in order to counterbalance for a pension shortage by reasoning an single insurance. The most of import insurance in this class is the rente insurance. The build nest eggs strategies from these insurance are extra on the top of the province ‘s pension and the auxiliary work related pension.

The focal point of this thesis is on the auxiliary pension strategy which are build up via the employers, the 2nd pillar of the Dutch pension system. The other two pillars will non be farther discussed in this thesis.

2.2 Fund Regulators and pension statute law

As from October 2004 the Dutch Central Bank “ De Nederlandse Bank ” ( DNB ) and Pensioen & A ; Verzekeringskamer ( PVK ) have merged. From that minute DNB supervise the Dutch pension financess. Before the amalgamation DNB was responsible for the supervising of the recognition establishments and PVK for the supervising of the pension financess and the insurance companies. The policy of DNB consists of supervising ordinances, policy regulations and recommendations. In the tabular array below an overview of the Dutch pension financess are given:

Table 8.17 Pension financess under supervising of DNB

A

A

A

A

A

A

A

A

A

A

Aantallen instellingen per ultimo

A

A

A

A

A

A

A

A

A

A

A

A

A

A

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

A

____

____

____

____

____

____

____

____

____

____

____

____

____

A

A

A

A

A

A

A

A

A

A

A

A

A

A

Bedrijfspensioenfondsen verplicht

67

66

66

67

70

71

75

78

78

78

71

69

68

Bedrijfspensioenfondsen niet verplicht

15

19

27

25

30

31

28

24

25

25

25

26

19

Ondernemingspensioenfondsen

957

938

904

877

843

804

753

714

676

643

597

543

474

Ondernemingsspaarfondsen

9

6

6

6

7

7

6

8

7

7

7

4

5

Beroepspensioenfondsen

11

11

11

11

11

11

11

13

12

12

12

13

12

Speciale wetgeving

1

2

2

2

2

2

2

2

2

2

1

1

1

A

____

____

____

____

____

____

____

____

____

____

____

______

______

Totaal

1060

1042

1016

988

963

926

875

839

800

767

713

656

579

Beginning: www.dnb.nl

In order to procure the affordability of the pension system, a legal model have been established. This consists of the Pensions Act ( PW ) , the 2000 Mandatory Participation in an Industry-Wide Fund Act ( Bpf 2000 ) , the Mandatory Pension Act for Professional Groups ( WVB ) and the Equalisation of Pension Rights in the Event of a Divorce Act ( WVPS )[ 2 ].

In 2007, the pension act has become effectual. This has lead to the debut of the Financial Assessment Framework ( FTK ) . The FTK formulates the demands with respect to the fiscal place of the pension financess and insurance companies through coverage ratio and safeguarding that the pension financess dispose of adequate equity to be able to cover with fiscal reverses. The aim of FTK is to protect the pension promise of participants in a pension fund and to supply a better penetration in the capital support and the fiscal hazards of the pension financess and insurance companies. Harmonizing to the pension act the minimal coverage ratio is 105 % .

A coverage ratio of 100 % means that the pension does hold merely plenty equity to follow with the pension duties. A coverage ratio higher than 100 % consequences in a buffer and lower than 100 % signifies a shortage.

Beside the pension regulator DNB, the Dutch Authority for the Financial Markets ( AFM ) does besides oversee the pension financess. The AFM maintain supervising of the information supply by pension financess. The pension financess must unwrap some information to the participants and the antique participants of the pension strategy and the pensionaries. It is required that this information is disclosed on clip and is apprehensible, clearly and rectify.

Furthermore, the AFM supervises the conformity of bureau ( zorgplicht ) for the defined part programs. Pension financess are required to advice the pension strategy participants about their investings.

2.3 Pension accounting before Adoption of IFRS

The “ Raad voor de Jaarverslaggeving ” ( RJ ) is the board who formulates the accounting guidelines for the Dutch companies. The bill of exchange accounting guideline RJ 271 was published in 1999. Due the considerable remarks on the content of this bill of exchange, prevent the RJ to print a unequivocal version of the accounting guideline RJ 271.

It took three old ages before the board could print a treatment memoranda since there was a batch of treatment about the acceptance of IAS 19 and the acknowledging method of the pension strategies in the fiscal statements. Finally in July 2003, the board has published a unequivocal version of RJ 271. The RJ indicates that they formulates the guideline 271 based on IAS 19 and the Dutch pension system. The unequivocal version of RJ 271 is compulsory for financial periods get downing on or after 1 January 2005

During the periods that there was n’t any accounting guideline for the pension strategies, the companies recorded the pension parts paid to the pension fund in the income statement as a liability. Harmonizing to art. 2:362 lid 5 BW the liabilities sing the pension strategy should be justified in the net incomes and loss history of the employment period in which the labor have been performed.

2.4 Pension Accounting and IFRS

2.5 Dutch pension system and the market turbulency

Pension accounting vanaf 1 January 2005 i? IAS 19 + aanpassingen ( Fair value, exchange DB naar DC, verwijzen naar surveies vb Brouwer, Nederland was DB, kritiek IAS 19 )

Dnb PENSIOEN proctor

Pensioenen en crisis