Aging

Pension of the future must be flexible

‘Interaction between pensions, healthcare and housing needed’

New pension contracts should allow room for flexibility and customization: that’s the message being sent by Tilburg professor Lans Bovenberg in a recently published NEA paper produced in collaboration with Wouter Koelewijn and Niels Kortleve of pension organization PGGM. Pension fund participants differ from each other in their willingness and ability to absorb risks: how they do so depends on their individual situation and preferences.

The social partners and the government are working on new pension contracts in which the participants bear more explicit macro risks. Since not everyone is equally able to shoulder such risks, the authors advocate customization. Increasing individualization is another factor that magnifies the differences between participants and requires more options to be made available.

Bovenberg et al. are thinking in terms of a pension that is more dynamic, both in the construction phase (rate and type of pension accrual) and in the benefit phase (rate of capital reduction and payout options). The pension sector can also help participants to continue working longer in good health: part-time retirement can be an important tool to enable people to work longer.

The authors call on the pension sector to incorporate the challenges of housing and care for the elderly into the design of the new pension system, and to go in search of the best possible interaction between the domains of pensions, healthcare and housing. In their paper they put forward a number of proposals to achieve this goal.

Read more (in Dutch): Lans Bovenberg, Wouter Koelewijn en Niels Kortleve: Naar een dynamische toekomstvoorziening. Integratie van werk, pensioen, zorg en wonen over de levensloop