The Netherlands, long regarded as a global leader in pension design, is embarking on a sweeping reform that will see all Dutch defined benefit (DB) pension schemes converted to defined contribution (DC) by January 2028. The Future of Pensions Act or Wet Toekomst Pensioenen (Wtp) enforces a fundamental shift in how risk is managed, especially with the introduction of reserves and the transition to new pension contracts (NPC) that emphasise individual accrual and transparency.
The world’s eyes are on the Dutch market, and for good reason: the scale, ambition, and complexity of this transition will set precedent for pension systems everywhere. The success of the reform will depend on the ability of market participants to deliver the operational, technical, and reporting transformation required. This blog explores what the Dutch pension transition means for those on the front lines of implementation.
The drive for reform is rooted in the realities facing pension systems globally. Dutch DB plans, like those in many developed markets, have struggled with chronic underfunding, a challenge made worse by demographic shifts, market volatility, and persistently low interest rates. The traditional model often left participants unclear about the connection between their contributions, investment returns, and eventual entitlements. Societal pressures, including an ageing population, the retirement of the baby boom generation, and the rising cost of living, have made the need for change both urgent and unavoidable.
The NPC is the Dutch government’s answer to these challenges. It requires all accrued pension rights to be converted to DC, with full transparency over assets, contributions, and investment returns at the individual level. The era of vague promises about future payments is ending; now, every individual must be able to see exactly what is in their pension pot and how it got there.
Employers, if they haven’t already, must now make a strategic decision between the two new arrangements – Solidarity Pension Arrangement (SPR) and Flexible Pension Arrangement (FPR), where the accumulation and decumulation phases are setup and treated differently – selecting the model that best aligns with their workforces’ needs.
The Solidarity Pension Arrangement (SPR) pools workers contributions and enables intergenerational risk sharing using an investment solidarity reserve to cushion extreme losses. All individuals contribute the same percentage of their income, and the system is designed to balance collective security with individual fairness.
In contrast, the Flexible Pension Arrangement (FPR) offers more individual choice, with separate accumulation and decumulation phases for individuals who opt for collective variable pensions and the possibility for participants to have a greater say in how their assets are allocated. This is in someway similar to UK DC pension schemes where the individual can make their own decisions in asset allocation based on their risk appetite.
The law also mandates that schemes provide proof of assets, contributions, and investment returns at the individual level, forbidding any promises of future payments. Employers must decide which arrangement best suits their workforce and communicate this to their asset managers well ahead of the deadline.
The NPC also brings about a new standard for exchanging data between market participants, i.e., the asset manager, pension provider, and administrator, in the form of SIVI messages. SIVI messages are standardised digital formats designed to streamline data exchange between pension providers, asset managers, and administrators under the New Pension Contract (NPC).
Developed by the Dutch standardisation institute SIVI, these JSON-based messages enable secure, automated communication via APIs, reducing manual processes and ensuring compliance with regulatory and privacy requirements. By creating a common language for reporting on contributions, assets, and returns, SIVI messages play a critical role in delivering transparency and operational efficiency in the new pension landscape.
This is not just a Dutch story. Pension systems around the world are facing similar pressures, ageing populations, shrinking workforces, and the ongoing challenge of ensuring sustainable funding. Observers across the globe will be interested in how the introduction of new mechanisms, such as risk-sharing reserves and cohort-based models, plays out and whether these measures can deliver improved outcomes. Ultimately, the Dutch experience is likely to inform ongoing debates and policy development in pension systems globally.
The transition to the new regime under Wtp presents a significant operational challenge for pension providers, asset managers, pension administrators, and service providers. Success will depend on their ability to understand client’s requirements, transition smoothly to the NPC, and deliver robust reporting and data exchange between the industry participants and to the regulator. Pension providers and service providers must coordinate in establishing correct portfolio structures, data transparency, IT deployment, and cashflow management to deliver on the operational demands of the Dutch pension reform.
Portfolio structuring is the critical first step in implementing the new pension contract. If an asset manager acts as a fiduciary for both SPR and FPR clients, the first priority is to understand the specific requirements of each pension provider client and structure portfolios accordingly.
SPR portfolios tend to be simpler, while FPR portfolios require more granular structuring, often with separate accumulation and decumulation phases. Here, the use of unitised modules, such as Match and Return or Rente and Rendement, enables more effective asset allocation, tailored to the risk profiles of different age cohorts.
This step, in turn, drives the SIVI reporting process, making portfolio structure a critical aspect of NPC implementation.
The need for look-through reporting adds a significant layer of complexity to portfolio structuring, as it requires transparency down to the underlying assets and cashflows. While some administrators mandate this level of detail, others do not, resulting in varied operational demands.
Implementing look-through often requires substantial IT investment and can be a significant lift, particularly when middle and back-office functions are outsourced. Crucially, clear look-through enables accurate financial reporting and effective cashflow management, and is central to meeting the transparency and accountability standards set by the new regime.
Mandated under Wtp, SIVI messages standardise data exchange, enabling secure, automated, and compliant reporting that reduces manual effort and operational risk.
SIVI reporting is a complex undertaking that requires early, focused IT investment and close coordination between pension providers, fiduciaries, and administrators and outsourced service provider if any. Industry participants must identify which SIVI messages are in scope for their operations and begin development well ahead of the deadlines, including establishing API connectivity across all parties—whether administrator, fiduciary, or outsourced service provider—as these integrations can significantly affect transition timelines.
Managing the netting of cashflows between PUO (Pensioenuitvoeringsorganisatie, or Pension Administration Organisation) and pension providers also demands robust IT systems to ensure accuracy and timeliness, with transfer agents playing a key role as organisations tend to use unitised modules to manage the asset and returns allocations.
The operational lift is compounded by time pressures and resource constraints, demanding swift, strategic decisions from organisations to avoid missing regulatory deadlines.
Time pressures are particularly acute. Producing the necessary portfolio look-through can be a complex endeavour, reflecting the depth and complexity of data required. Establishing API connectivity between pension providers, asset managers, and service providers is similarly challenging, due to both technical integration and management approvals, especially when factoring in security risks. Delays in these areas can significantly disrupt transition schedules, particularly when middle and back-office functions are outsourced.
The scale and complexity of compliance will inevitably affect business models, and the environment created by the Wtp has the potential to drive consolidation in the sector. Only those with sufficient resources and technical expertise will be able to meet the demands of the new regime, while smaller players may struggle to allocate the necessary investment for implementation and even large pension administrators may consider exiting the business due to the complexity.
The Dutch pension reform will be a test of operational resilience, technical capability, and strategic foresight. Those who can deliver transparency, manage complexity, and support clients through this transition will not only meet regulatory requirements, but they will also set themselves apart in a market that is being watched by the world.
Citisoft is already helping clients navigate this journey, drawing on deep experience in operating model transformation, data management, and regulatory change. Need further guidance? Get in touch