Dutch Pension Fund Update - Pension Law Amendments Rejected, Curve Steepens
Today, the Dutch Parliament rejected the proposal to drastically amend the earlier adopted pension law. After the first vote, which took place per party, the votes were tied (75 against 75), a roll-call vote was held, which ultimately resulted in 72 votes in favour of the amendments and 73 against. In response to this vote, the EUR swap curve steepened which is in line with our view that the transition will result in a shift of hedges from the long end to shorter on the curve.
The past few months have been dominated by proposals to drastically amend the pension law, which already came into force on 1 July 2023 and regulates the transition of the Dutch pension system from a defined benefit to a defined contribution framework. The most important part of the proposal was to give pension fund members the individual choice of whether or not to transfer their accrued pension rights to the new framework. According to the Council of State, the supervisors, the pension federation, the pension funds and the Minister of Social Affairs, these proposals or the ability to opt-out would be unworkable and lead to high costs. They would also undermine the principle of solidarity in the Dutch pension system.
After two debates at the end of April and this month, the vote took place today. It was already clear beforehand that the supporters and opponents would be closely divided. Two small parties would tip the balance, and when the Party for the Animals (PvdD) announced yesterday that it would vote in favour of the amendment, there was almost a majority in favour of the proposal. This meant that the fate of the amendment was in the hands of another small party, DENK. Just before the vote, this party issued a statement on X indicating that it would vote against the amendment. As a result, even before the first vote, which took place at party level, it was clear that the votes would be tied at 75 in favour of the amendment and 75 against.
A roll-call vote was then held among the members of parliament. As not all MPs were present, the outcome was unclear beforehand. After the votes were counted, there was a narrow majority against the amendment (72 to 73). This seems to indicate that the political uncertainty surrounding the transition is now behind us.
In response to the vote, the various swap curves steepened by a few basis points. Based on our analyses, we expect that the pension sector will have less need to hedge the ultra-long part of the curve as a result of the transition. In anticipation of this, the 30s50s swap curve has already steepened since the beginning of this year, and today's reaction also indicates that the market expects a further steepening of the curve.
