June 29, 2007 4:20
Vanguard guy says Dutch pensions are good, but not necessarily something we want to imitate
The excitement over my column on the swellness of the Dutch pension system continues. Here's the reaction of Steve Utkus, who runs the Vanguard Center for Retirement Research:
The Dutch system is interesting but has some limitations from a European perspective. One is that it ties benefits to working in the Netherlands, a small country and job market, inhibiting workers from moving across the continent. Another is that the pensions are organized on occupational/industry lines, and so there are issues in moving from pension system to system when an industry is in decline.
Also, the US does have a compulsory DB system known as Social Security. The relevant issue in the US is not probably whether we need more DB, but whether we need workplace DC for the mid/small employers who don't offer 401Ks.A sensible system to match the Dutch system, with more flexibility, would blend the DB/SS system with a compulsory DC system for small employers. And that's exactly what policymakers are debating in the mandatory auto IRA proposals.
DB means defined benefit, like a pension plan. DC means defined contribution, like a 401(k). The "mandatory auto IRA proposal" Utkus is talking about is something that comes up from time to time among wonky Washington types, but I have no idea what kind of traction it has among actual lawmakers.
About The Curious Capitalist
Justin Fox is TIME's business and economics columnist. This is his blog. About the Authors
Barbara Kiviat just celebrated her 5-year anniversary covering business and economics for TIME magazine. About the Authors
RSS Feed
 |
Daily Email
Recent Posts
- Paulson thinking of betting on the mortgage upside. But not quite yet
- President Bush says Wall Street got drunk. Anyone care to disagree?
- The social responsibility of business is ... what again?
- Can Paulson really do anything about 'too big to fail'?
- The CBO estimates the cost of the Fannie-Freddie backstop: Only $25 billion, but ...
The Curious Capitalist Archives
Blog Roll
- Going Private
- Calculated Risk
- Nicholas Carr
- Brad DeLong
- Econbrowser
- Econlog
- John Gapper
- Herb Greenberg
- Paul Kedrosky
- Ezra Klein
- Adam Lashinsky
- Michael Mandel
- Greg Mankiw
- Marginal Revolution
- Matt McAlister
- Megan McArdle
- Mike Moffatt
- Floyd Norris
- Roger Parloff
- James Pethokoukis
- Barry Ritholtz
- Felix Salmon
- Mark Thoma
- Amit Varma
Reader Comments (4)
"A sensible system to match the Dutch system, with more flexibility, would blend the DB/SS system with a compulsory DC system for small employers. "
translation: A sensible system is one that enriches my employer, Vanguard, without creating any risk for the company. Just force people to use investment services like those that my company provides, especially the ones with no guarantee that the money they are forced to contribute will actually provide them cash for their retirement.
Posted by p_lukasiak | July 2, 2007 11:42 AM
Well, Vanguard is a co-op owned by the investors in its funds, so I don't think putting them in charge of said DC system would be much of a problem. But in general I think the idea would be to have something like the federal TSP, where a board picks the investment managers and negotiates low fees. Obviously some folks on Wall Street would lobby for a different, more expensive set-up. But I doubt Vanguard would be among them.
What exactly is the alternative you propose? Do you think your local barber should be liable for his employees' retirement income 50 years down the road?
Posted by Justin Fox | July 2, 2007 10:24 PM
"What exactly is the alternative you propose? Do you think your local barber should be liable for his employees' retirement income 50 years down the road?"
I think the local barber should be required to put money into a common "defined benefit" program sufficient to ensure that those benefits are paid... kind of like the Dutch program (at least as I understand it.)
But I'm not really sure that we even need to come up with some compulsory additional retirement program.... I'd prefer to just let the government raise taxes, and guarantee a reasonable standard of living for all seniors.
Which is really close to what we are already doing -- albeit the burden seems to fall disproportionate on local governments....
Posted by p_lukasiak | July 2, 2007 11:13 PM
p_lukasiak
"...just let the government raise taxes, and guarantee a reasonable standard of living for all seniors"
Why just seniors?
What do you have against children? And how about those just starting to work youth or those college students without rich parents or grants? How about people who, through no fault of their own, have gotten stuck in low paying jobs? Why shouldn't everyone have a guaranteed reasonable standard of living?
"... the burden seems to fall disproportionate (sic) on local governments."
Why can't they just raise taxes as you have suggested? Does it make a difference that local governments get the majority of their revenues from real estate taxes?
Posted by GLD | July 2, 2007 11:51 PM