Dutch sector-wide supplementary pensions: fund governance, European competition policy, and the geography of finance

There is considerable interest in the design and funding of European pension systems. While many commentators emphasise the financial burden of underfunded European social security systems, less understood are the structure and performance of European supplementary pensions. We introduce readers to the Dutch system of funded supplementary pensions, focusing upon the governance structure of those pension funds in the context of European competition policy. From the early 1950s the Dutch government has encouraged the development of employer-sponsored and industry-wide supplementary pensions covering most employed Dutch workers. As the government has slowly discounted the real value of social security, supplementary pensions have come to play an increasingly important role in maintaining high levels of income replacement upon retirement. From the perspective of Anglo-American competition policy, these pension institutions appear unusual. In many instances, firms are required to participate in sector schemes, denying them the right to make separate arrangements with competing financial institutions. Moreover, many sector schemes are mutually owned financial conglomerates selling services to captive internal markets. Referencing the decision of the European Court of Justice in Maatschappij Drijvende Bokken BV we assess the arguments for and against this model of pension provision in the light of European competition policy and the geography of finance. While we are sympathetic to the goals of social solidarity, the underlying structure of governance combines the risks of moral hazard with limited transparency and accountability.