Are Dutch pensions a good investment? Recent news about increasing contributions, investment losses, and risk of pension cuts by @NOS, @NRC, @FD_Nieuws and others made me curious about the return of my #pensioen. nos.nl/artikel/236500… 1/n
Based on my back-of-the-envelope calculation, Dutch pensions are actually a pretty bad deal. It is likely that current contributors will receive less money than what they pay in. It is crucial that the new #pensioenakkoord is implemented fairly to improve this situation. 2/n
Take @abppensioen, the largest pension fund in #NL. Like many other funds, ABP increased the contribution percentage to 25.9% as of 2021. This means that employer and employee contribute 25.9% of the pensionable salary to ABP each year. 3/n
If you make these contributions for 30 years and your salary increases with inflation every year, contributions will be 30*25.9% = 7.77 times your pensionable salary. How much pension do you get from these contributions? 4/n
For each year you contribute, you accrue 1.875% of your pensionable salary in retirement income. How much you will actually be able to afford with your pension depends on whether pension funds increase your pensions with inflation. 5/n
ABP has not indexed pensions for the last 10 years. And as it stands now, ABP will not be able to do so any time soon. With inflation equal to the ECB’s target, 30 years of contributions would give a real pension of 43% of the current pensionable salary at age 68. 6/n
Based on current life expectancy, let’s assume you will receive pension until you are 86. At 86, your real pension will only be 31% of your pensionable salary. Your total real pension payout is thus only 6.5 times your current pensionable salary. 7/n
This is 16% less(!) than the amount you will have paid in. You need to get at least 91 years old to receive your money back and much older to make your ABP pension a decent investment. 8/n
The news often focuses on retirees and pension cuts, but without cuts and less redistribution, Dutch pensions are a losing proposition for the current generation of contributors that is already faced with less stable jobs and huge economic uncertainty (see also @TheoGommer) 9/n
@wolzak, @christiaanpe, @Thomopheikens, @jvanwensen: It is time to make this issue more transparent. The transition to the new #pensioenstelsel needs to be fair to current contributors and younger people who are often underrepresented in the public debate. 10/n
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