The Dutch CDC pension reforms: Some key takeaways as the UK begins its own CDC journey

The Netherlands consistently ranks as a global leader for pension provision. Despite this success, the country has been debating pension provision for many years, culminating in a new pensions law which requires pension funds to transition to one of two new Collective Defined Contribution (CDC) flavours. This article explains what the reforms entail and sets out some key takeaways for the UK as it embarks on its own CDC journey. Executive summary Dutch pension funds are undergoing large-scale reform: some of the largest pension funds in Europe will convert members’ accrued pensions into individual pension pots. Employers and work councils have a choice of two flavours of CDC: a Solidary Pension Arrangement (SPR) and a Flexible Pension Arrangement (FPR). The solidary arrangement will maintain collective investments but with returns distributed between members’ individual pots according to a novel glidepath mechanism. The flexible arrangement will look more like individual DC but with longevity risk-pooling (or insured annuities) after retirement. Under both arrangements, contribution percentages will become age-independent and the law requires members disadvantaged by the transition to be compensated. The reforms will follow an ambitious timescale – unless there is further political intervention, the current deadline for transitioning to one of the new arrangements is 1st January 2028.