Pension Funds and Ageing Society

Pensions, housing & long term care

envisioning the future……….

London, 10 November 2011Gert-Jan Sikking, Innovation PGGM

http://www.nieuweoudedag.nl/enodgr.jpg

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• Cooperative: 560.000 members• Originates from (19) pension schemes in health care and

social services sectors (founded 1969)• 6 pension funds as clients• Pension service provider (not the fund!): 2.3 mln. participants,

€100 bln AUM• No 2 in Netherlands, No 3 in Europe

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Dutch Pension SystemThree pillar model

Private life insurance/savings arrangements funding

Supplementary (occupational) pensions(supplements state pension to approx. 70% of salary)

funding

State pensions€ 18,000 (couples)€ 13,100 (singles)

pay-as-you-go

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Trends: people are getting older

Source: PGGM

Men

Women

Men, old trend

Women, old trend

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Trends: an aging society

Sorce: CBS

1950 2008 2050

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Societies in Transformation

2010 2030 2050

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Trends: increase ageing-related public spending

Increase from 12.4% to 20.3% of public spending

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Larger slice of personal income to healthcare and pensions

2 0 11: P e r s o n a l in c o m e € 3 0 . 0 0 0

2 0 3 1: P e r s o n a l in c o m e € 3 0 . 0 0 0

• AOW-premium: € 5.500 • AWBZ: € 3.600 • Pension: € 2.200 • Health insurance € 100 p.m.• Taxes € 800

(= paid by employer)

• Total of 44% of personal income to healthcare and pensions

• AOW-premium: € 9.000 • AWBZ: € 6.000 • Pension: € 2.200• Health insurance € 175 p.m.

• Total of 64% of personal income to healthcare and pensions

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Healthcare labor demand larger than supply (Netherlands untill 2025)

Total labor supply

Labor demandHealthcare

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Pensions, care and housing have similar ‘careers’

AGE →AGE → 18-30 30-55 55-65 65-75 >75

Pensions Saving(related to income) Withdrawal

Health status Healthy Minorcomplaints

Limited

Housing Solo/Duo

Family Empty nest Modi-fied

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lifecycle

Flexible capital appreciation over the life cycle

Pension, capital, income

Human Capital

Healthcare and wellbeing

Housing

Dom

ains

Flex

ible

cap

ital

app

reci

atio

n ov

er

dom

ains

Education

Pension capital inown house

Time for taking care forchildren and parents

Use value of house for health care costs

Vitality

Bron: Martin van Rijn, Wouter Koelewijn en Niels Kortleve en (2010), ‘Naar een bredere kijk op pensioen’, ESB 95(4598), 26 november 2010

Flexibel pension: over life cycle and over domains

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OECD: Transforming Pensions and Healthcare

Source: concluding slide of Juan Yermo, OECD, “Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaborative Strategies “

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Innovation projects around New Old Age

• Invest in housing with elderly care

• “Health Care Miles”– Non-monetary currency to support informal care

• Health care saving– Similar as Pension saving, but different payout

• Reverse mortgage products / sale-lease-back– Use value of house to make adjustments in house and

finance required care

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Conclusion

• We want to help people to realize a valuable and worthy future

• Separate domains: solutions within domains are suboptimal for citizens

• More flexibility needed over life cycle and between domains

• PGGM is making steps in integrating domains

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Movie New Old Age

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