Sector in Focus: Pensions 2025

SECTOR IN FOCUS ANALYSIS
MAY 2025
Sector in Focus: Pensions 2025

In Brief
With this publication, the AFM shares sector-wide insights on important developments in the pension market. These insights can be valuable for pension administrators when making execution choices or designing new pension schemes. Thus, the publication enables pension administrators and social partners to compare the characteristics of their own scheme and the choice options for participants with sector-wide insights.

SECTOR IN FOCUS ANALYSIS
Introduction to Sector in Focus: Pensions 2025 3 Key Points 4

1. State of the Pension Sector 6
   1.1 Overview of Pension Administrators 8
   1.2 Types of Pension Agreements 10
   1.3 Accumulation Phase 13
   1.4 Payout Phase 18
   1.5 Correction Policy and Complaints 21
2. Scheme Characteristics: DB 24
   2.1 Choices within DB Schemes 26
   2.2 Pension Provisions for Potential Partners and in Case of Disability 29
   2.3 Limited Accumulation within DB Schemes 31
   2.4 Pensions at the End of the Term 32
3. Scheme Characteristics: DC 33
   3.1 Pension Accumulation and Payout 36
   3.2 Choices within DC Schemes 38
   3.3 Pension Provisions for Potential Partners and in Case of Disability 44
   3.4 Pensions at the End of the Term 46
   3.5 Limited Premium Contributions in DC Schemes 47
   Table of Contents

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Introduction to Sector in Focus: Pensions 2025

In Brief
Sector in Focus: Pensions 2025 describes the state of the pension sector at the end of 2023, and the most important characteristics, trends, and developments regarding payout agreements (DB) and premium agreements (DC).

Why this Sector in Focus?
In this Sector in Focus, we share some insights from the data of the Supervisory Reporting Second Pillar Pension. Pension administrators and social partners can use this, for example, to compare the characteristics of their own pension scheme and the choice options for participants in the scheme with sector-wide insights. This can help them in organizing and evaluating their pension scheme and service delivery. Periodically, we also bring deeper insights from this Sector in Focus to attention via the AFM transition bulletin.

What can you expect?
The first chapter shows some general developments within the second-pillar pension sector. Such as how many pension administrators are active, what type of pension schemes they offer, and the size of the different types of agreements, both in the accumulation and payout phases. In addition to the general insights, this chapter contains four in-depth analyses. Here, we provide additional clarification on current topics by looking deeper into the data. For example, we see that the premium schemes executed by pension funds currently still largely have an supplementary character, an image that will change rapidly in the coming years.

Chapter two (DB schemes) and chapter three (DC schemes) go deeper into the characteristics of the pension agreements in these two categories. Using various graphs, we highlight the most important observations and trends. Each chapter starts with a brief summary and infographic with key figures.

How was this Sector in Focus created?
This publication is based on data that is submitted annually via the supervisory reporting second pillar pension by all Dutch pension funds, pension insurers, and premium pension institutions (together the 'pension administrators'). The AFM also uses the data from the Supervisory Reporting Second Pillar Pension to monitor the most important trends and developments in the pension sector and to maintain risk-based supervision. Based on this data, we quantify risks and prioritize themes for our supervision.

The insights in this publication are based on the reporting year 2023 (reference date December 31, 2023) and are not traceable to individual pension administrators.
To monitor how the transition to the new pension system is proceeding, we have updated the reporting format. Thus, pension administrators can now indicate the distinction between the old and new contract forms. In addition, the Supervisory Reporting has included a number of new standards this year, such as choice guidance, accuracy of scenario amounts, and adequate complaint handling.

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Key Points

Inform participants about the risk of income drop for their partner upon death It is important that participants, and especially their survivors, have good insight into the partner pension they are or are not building up. From the information the AFM has requested on this, it appears that a portion of both dormant and active participants with payout and premium agreements face risks regarding their survivor pension.

For example, more than two million dormant participants with payout agreements currently have no (further) claim to a partner pension. They are therefore completely dependent on any subsequent pension scheme for coverage of the partner pension. From the available data, we cannot deduce whether this group is building up partner pension elsewhere. If they do not have new or other coverage for the partner pension, for example because they work as self-employed or go into employment with an employer without a pension scheme, their partner may face a significant income drop upon their death.

We also see risks among active participants. For more than half a million active participants, no partner pension is arranged within the current scheme. In addition, there is a considerable group of participants with a partner pension on a risk basis, for which the coverage of the partner pension ceases when their employment contract ends. This applies to payout agreements for 25% of participants with a partner pension (see figure 28), and to premium agreements for more than 70% (see figure 50).

With the entry into force of the Future Pensions Act, the character of the partner pension changes drastically. In the new pension system, the partner pension upon death before pension date is standardly arranged on a risk basis. There is a risk that the group of participants who become financially vulnerable upon termination of their employment will increase as a result. The AFM will therefore pay extra attention in the coming period to the provision of information about the survivor pension (e.g., in stop letters) and to choice guidance regarding the voluntary continuation of the survivor pension.

It is of great importance that participants are well informed and guided when making choices about their coverage so that they are aware of possible financial risks for themselves and their survivors and the possibilities they have to protect themselves against these risks.

Increase in complaints regarding transition expected, ensure adequate complaint procedure and transparent correction policy Since 2021, the number of pension administrators with a correction policy has increased from 37% to 90% (see figure 20). At the end of 2022, the AFM called on the sector to develop and make publicly available a correction policy ('Call: Develop and publish correction policy'). The number of pension administrators with a correction policy has risen to 90% in the meantime. The AFM is positive about this development but emphasizes that it expects administrators who do not yet have a correction policy to draw it up and publish it in the short term.

A clear and publicly available correction policy contributes to consistent handling and ensures clear expectations for the participant and increases trust in the pension administrator. The correction policy is thus an important part of a good complaint procedure.

Data from pension administrators shows that more than a third of the complaints received in 2023 related to the transition to the new pension system and the information provision to participants.

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A possible explanation for this is the entry into force of the Future Pensions Act on July 1, 2023. Given that complaints regarding the transition may increase, it is important that pension administrators are able to handle complaints correctly and within a reasonable time frame even during peak pressure. See also: 'Be prepared for (strong) increase in complaints shortly before and after transition'.

Because the new legal requirements for complaint procedures have only been in force since the middle of the reporting period (from July 1, 2023), reporting on complaint handling was still optional in this reporting year. Nevertheless, the data already provides valuable insights into complaint handling in 2023. From the next reporting, this insight will be complete and thus more representative.

Find more information on setting up an internal complaint procedure and communicating about data correction on the complaints web page and the data quality web page of the AFM.

Prevent unrealistic expectations about the new pension Scenario amounts give participants insight into the future height of their pension and make the uncertainty regarding the final payout visible by showing it in three scenarios: an expected scenario, an optimistic (good weather) scenario, and a pessimistic (bad weather) scenario.

From the information the AFM requested for the first time this year, it appears that the spread between the good weather and bad weather scenario differs strongly per type of pension agreement and per age (see page 23). For example, for a 30-year-old with a payout agreement, the good weather scenario is on average 1.5 times higher than the bad weather scenario, while for a 30-year-old with a premium scheme, it is on average 6 times higher. For a 60-year-old, this spread is smaller, with the good weather scenario on average 1.2 times higher for a payout agreement and 1.7 times higher for a premium scheme.

The large difference in spread between payout and premium agreements is due, among other things, to the 'enough-is-enough' principle in payout agreements, where excess returns largely end up in collective buffers, while in premium agreements, excess returns are directly visible in the participants' pension assets. Additionally, a riskier investment policy among young people increases the spread in outcomes, and the fiscal limits on premiums are often not included in these projections, meaning the amounts shown are theoretical and not always achievable in reality.

Scenario amounts are calculated based on the uniform calculation method (URM) and the scenario sets provided by DNB. Without context, these amounts can lead to unrealistic expectations among participants, especially during the transition to the new pension system, where amounts from the old (payout agreements) and new (premium agreements) systems are compared with each other. Personalized explanations of the scenario amounts help participants understand the amounts shown and place them in the correct context, creating a realistic image of the future pension and avoiding unnecessary disappointments.

Find more information on scenario amounts and preventing unrealistic expectations on the scenario amounts web page of the AFM.

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1. State of the Pension Sector

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In this chapter, we map the developments within the (second-pillar) pension sector. We start with an overview of the pension administrators, focusing on the number of pension administrators (paragraph 1.1), their size, and the different types of pension agreements they offer (paragraph 1.2). Subsequently, we look at the state of the pension sector based on two phases:

1. The accumulation phase (paragraph 1.3): the period in which a (former) participant builds up pension, up to the pension date.
2. The payout phase (paragraph 1.4): the period in which a pensioner receives a pension payout.

Within these phases, we zoom in on the total pension assets, the participants, and the most important differences between pension administrators.
Since the revision of the supervisory reporting, we have also included information on complaint handling at pension funds, such as the number of complaints, handling time, and the nature of the complaints. In this chapter, we have included some initial insights from this information (paragraph 1.5). In the future, we will pay more extensive attention to this. Also for scenario amounts, another new component, we have included an insight into the difference between premium and payout agreements.

What strikes us
The Dutch pension sector is in continuous motion. Since 2019, the year we started with the supervisory reporting, we have seen, for example, the number of pension administrators steadily decrease. Because it is mainly the smaller (corporate) pension funds that are stopping, we also see the characteristics of the remaining pension administrators changing. Thus, the size of the other pension administrators is increasing.

In addition, a slow but steady shift is visible in the way participants build up their pension in the second pillar. Payout agreements remain the norm for now, but the number of participants building up pension via a premium scheme is increasing. This will change in the coming years due to the adjusted pension law. On the reference date on which this report is based (December 31, 2023), there were still very few new-style premium agreements, so we speak in most places of premium agreements in a general sense.

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1.1 Overview of Pension Administrators
Figure 1: Trend in the number of second-pillar pension administrators, by type of pension administrator

Since 2019, the year the AFM started this supervisory reporting, we have seen the number of pension administrators on the Dutch second-pillar pension market steadily decrease. In 2019, there were 206 pension administrators active; in 2023, there were 165. This amounts to a decrease of 41 pension administrators, including 38 pension funds and three insurers. The consolidation that has long been playing out within the second-pillar pension sector is thus continuing, although the pace seems to be flattening.

Figure 2: Trend in the number of pension funds, by type of pension fund

Despite the decrease in the number of pension funds, they remain by far the largest group within the administrators of second-pillar pensions. Corporate pension funds are the most common, accounting for more than 60% of all pension funds together. However, the number of corporate pension funds has also declined the fastest in recent years.

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Focus
Consolidation among pension funds
In recent years, mainly smaller pension funds have stopped. The number of small pension funds has steadily decreased since 2019, while the number of medium and large pension funds has remained relatively stable. This also has an impact on the average number of participants at pension funds. This has increased by more than 20% since 2019. The consolidation within the sector thus leads not only to a decrease in the number of funds but also to a shift in the distribution by size.

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1.2 Types of Pension Agreements
Figure 3: Types of pension agreements in portfolio, by type of pension administrator (accumulation phase)

Pension administrators can have different types of pension agreements in their portfolio in both the accumulation and payout phases. In the accumulation phase, we distinguish between pensions based on payout agreements, premium agreements, and capital agreements. In the payout phase, we distinguish between payouts from premium or payout agreements. Having an agreement in the portfolio does not mean that every administrator actively offers these agreements to new participants.

Figure 4: Types of pension agreements in portfolio, by type of pension administrator (payout phase)

Types of agreements at pension funds
Payout agreements occur in both the accumulation and payout phases at almost all pension funds. About one-third of pension funds manage a premium agreement in the accumulation phase. In the payout phase, that is only one in six.

At pension funds that execute a premium agreement in the accumulation phase but not in the payout phase, the accumulated pension capitals are used to purchase pension in a DB collective, or participants must purchase their pension payout from an insurer or PPI.

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Types of agreements at insurers
Insurers manage both payout agreements and premium agreements in the accumulation phase, with both occurring roughly equally. In the payout phase, the distribution between payout and premium agreements at insurers remains largely the same. Currently, half of the pension insurers still have capital agreements in their portfolio. Fewer than ten thousand participants are building up pension within a capital agreement.

Because insurers no longer actively offer these agreements, this group is expected to gradually disappear. In this report, we have therefore no longer included capital agreements in the graphs.

Types of agreements at PPIs
PPIs may only execute premium agreements and are primarily focused on the accumulation phase. Currently, one PPI also offers pension payouts.

Types of pension payout from premium agreements Pension administrators with a premium agreement in the payout phase can offer retirees a fixed or a variable pension payout. Currently, the fixed payout is the most common form at both pension funds and insurers. PPIs may only offer variable payouts.

At pension administrators who offer only a fixed or only a variable payout, participants have a (limited) shopping right. This means they have the possibility to purchase the type of pension payout that their pension administrator does not offer elsewhere.

Figure 5: Fixed and variable premium agreements in portfolio, by type of pension administrator (payout phase)

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Focus
Premium agreements at pension funds
Of the pension funds that have premium agreements in their portfolio in the accumulation phase, the majority actively offer them to new participants. Premium schemes can take different forms, depending on their purpose and target group. In the supervisory reporting, we distinguish four types of premium schemes:

1. Basic schemes: the main scheme in which a participant builds up pension.
2. Excess schemes: supplementary schemes for participants with a salary that exceeds the limit of the basic scheme.
3. Net schemes: supplementary schemes for participants with a salary that exceeds the fiscal maximum.
4. Other gross schemes: for example, voluntary additional savings schemes.

In practice, pension funds often use premium schemes supplementarily: two out of five pension funds offering premium schemes offer them as the basic pension scheme. The other pension funds usually combine the premium agreement with a basic payout agreement, where the premium scheme has a supplementary role and is used as an excess, net, or other gross scheme.

This confirms the image that payout agreements are still the dominant form of pension accumulation at pension funds and that premium schemes are still mainly used to facilitate supplementary pension accumulation for specific groups of participants, such as participants with a higher salary or those who want to voluntarily build up extra pension.

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1.3 Accumulation Phase
Figure 6: Trend in the distribution of the number of active participants by type of pension agreement (accumulation phase)

Active participants in the accumulation phase
Pensions in the accumulation phase belong to active participants or former participants. Active participants are currently building up pension through their employer, while former participants have built up pension rights in the past but no longer pay premiums.

Each year, the number of active participants building up pension in the second pillar increases. Since 2019, more than seven hundred thousand active participants have been added. The strongest increase is visible in the number of participants with a premium agreement; this type of scheme is responsible for more than 60% of the total growth in the number of active participants.

Figure 7: Number of active participants in the accumulation phase by type of agreement per type of pension administrator.

Distribution of active participants by type of pension administrator The distribution of active participants per type of pension administrator shows that pension funds primarily execute payout agreements and insurers primarily execute premium agreements. PPIs execute only premium agreements.

In 2023, the first pension schemes according to the Future Pensions Act (Wtp) were introduced. At the end of 2023, there were still very few new-style premium agreements. Fewer than seven thousand participants were already building up pension with an insurer or PPI in a scheme adapted to the new legislation.

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Total pension accumulation in the Netherlands
At the end of 2023, 20.7 million pensions had been accumulated in the Netherlands by active and former participants. It is important to emphasize that this number is larger than the number of unique persons who have built up a pension in the Netherlands. An individual can be registered as a participant with multiple administrators, for example due to built-up pension rights from different (former) employment relationships.

We analyze the number of participants in the accumulation phase in three ways: by type of pension scheme, the distribution of participants across the different pension administrators, and by participant status.

Distribution by type of pension scheme
From the distribution of participants per type of pension agreement, it appears that the pension of about three out of four participants has been built up via a payout agreement. This underscores that the payout agreement is still the norm. However, a steady increase is visible in the number of participants building up pension via a premium scheme. In 2023, premium agreements adapted to the new legislation also became part of this for the first time, but at the end of 2023, this was still small in size.

Figure 8: Trend in the number of participants per type of pension agreement (accumulation phase)

Figure 9: Trend in the number of participants per type of pension administrator