Do new Dutch pension regulations infringe EU law?
The Dutch government and the European Commission are engaged in a “pre-infringement dialogue” after the latter suspected that Dutch pension rules infringed European law (Guillaume Périgois/Unsplash)
Good morning. We generally cover investment matters here on AOX but this week we’re going to address a slightly different issue. Or is it?
As we have mentioned before, the Dutch pensions market is the biggest in the Eurozone, accounting for $2.1tn.
About 80 per cent of this (or $1.7tn) is invested in mandatory industry-wide pension funds.
This is the market which started going through huge reforms at the start of this year, which involved a shift away from a defined benefit approach towards a more defined contribution one.
But it turns out the Dutch government and the European Commission are engaged in a “pre-infringement dialogue” after the latter suspected that Dutch pension rules infringed European law.
The issue at hand is that Dutch pension rules effectively prevent funds from outside the Netherlands from offering their services within the country.
The rules state that a mandatory industry-wide pension fund should be established as a foundation under Dutch law. It was deemed that this, in effect, prevents pension funds from other member states from entering the Dutch market.
The Dutch government has said it is now preparing legislation that would remove this requirement and open up the market to foreign funds - though some requirements will be retained, including the fact that institutions providing pensions must be non-profit legal entities.
The complaint against the Dutch government was initiated by lawyer and pensions expert Hans Van Meerten.
He said: “It was not about mandatory participation as such, that’s fine by me, but my complaint was why does it only have to be Dutch funds.
“It is not even theoretically possible for a foreign fund to enter the Dutch market, it is not possible at all and in my view that led to all kinds of unfairness.
“The pension member is benefiting from the fact that other entities might offer a scheme which is cheaper and better. There was no competition.”
This is where we get to the question of whether this issue is actually about pension fund investments.
Van Meerten said Dutch pension funds had lost 4 per cent on average last year while an index tracker gained between 20 and 23 per cent.
This underperformance, Van Meerten said, went back years.
He said: “It is not that I want to open the market for foreign entities, it is fine if it is a Dutch pension as long as it is the cheapest and best.
“Foreign funds might have a price offering and investment strategy that is better.”
A European Commission spokesperson confirmed an ongoing pre-infringement dialogue with the Dutch authorities was taking place on certain aspects of their occupational pensions system.
They said: “The commission uses the pre-infringement dialogue whenever it is considered likely to lead to swifter compliance than a formal infringement procedure. The dialogue can also help the commission to determine whether a breach of EU law exists and inform further enforcement actions, if necessary.
“As the dialogue is in course, we will not comment further on the case.”
