Although not mandatory, sector-wide pension schemes often stipulate compulsory membership, which is approved by the Dutch government. Eighty per cent of all occupational scheme members are covered by mandatory sector-wide pension funds. Occupational pensions here are still mostly defined benefit. The Dutch system is designed with a public tier, as well as semi-mandatory occupational and voluntary private arrangements.
The public pension is funded by a government savings fund designed to cope with future demographic challenges.
There is a compulsory insurance plan financed on a pay-as-you-go basis.
The system covers employees in the private sector, civil servants and the self-employed.
Contributions are paid on income at a rate of 17.9 per cent, which is employee-financed and until 2028 the state pension will be guaranteed to rise in line with inflation.
The proposed British version, the Collective Defined Contribution (CDC) scheme, is viewed as a halfway house between money purchase schemes dogged by low annuity rates and gold-plated defined benefit pensions.
It is a shared fund instead of an individual pension pot, which means the risks around inflation, investment and life expectancy are spread.
Savers are guaranteed a regular income for life without the need for an annuity.
It also means employers are not left open to crippling liabilities.
But the Government admits CDCs are not a catch-all solution.
It says members will need to be clearly told how their monthly pension will fluctuate in value and could decrease.