Grand Rapids, MI -- (ReleaseWire) -- 06/11/2013 -- If you have trouble keeping up with what is going on in the U.S. economy, keep reading.
Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can help out. Whether people enjoy his weekly newsletter at www.moving-markets.com or his blog at www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On June 4, 2013 his blog was titled Dutch Pensions Cut for Existing Recipients.
"The Telegraph reported that Dutch pension recipients recently had their benefits cut due to not enough funding," began Tubbergen. "Sounds a lot like news stories regarding many U.S. municipalities like Detroit, Philadelphia, Stockton and others. The economic winter symptoms are far reaching and extend worldwide."
Below he quotes from the May 11, 2013 article.
"Millions of Dutch pensioners -- held up as the envy of their British counterparts by campaigners three years ago -- have been forced to cut pensions because of funding gaps, figures from the Dutch central bank show. The cuts average 1.9pc.
In all, 2 million active pension scheme members face cuts, on top of 1.1 million who are already receiving their pensions and 2.5 million "sleepers" (members who have changed jobs without taking their pension rights with them), European Pension News reported.
The development has sparked a lively debate among British pension experts about the merits of the Dutch scheme.
In 2010, David Pitt-Watson, a former chairman of Hermes Focus Asset Management, said British pensions "should go Dutch". In an article for The Daily Telegraph, he wrote: "If a typical British and a typical Dutch person save the same amount of money for their pension, the Dutch person will end up receiving at least 50pc more income in their retirement than the Briton. There is no trick here. It's just that the Dutch have an efficient architecture for their savings. We do not."
He said the Dutch system enjoyed economies of scale thanks to large schemes that covered a number of firms. These schemes can pay pensions from investment income instead of relying on annuities.
But responding to the recent cuts, John Lawson of Aviva said: "Dutch charges are not cheaper, nor are equities a one-way bet."
Henry Tapper of First Actuarial said the cuts should be put in "a little perspective". He said: "The Dutch system works rather like the with-profits system. Current Dutch pensions have been shown by David Pitt-Watson and others to be producing about 39pc more than our 'guaranteed pensions' (from annuities) in the UK."
"One of the big issues facing pensions is the actuarial assumptions used to calculate the current level of funding needed to fully fund future pension benefits," explains Tubbergen. "While I'm not familiar with these rules as they relate to Dutch pensions, I do know that many actuaries who calculate required funding levels for many U.S. pensions can use an anticipated rate of return for stock assets and bond assets that is much higher than the rates of return that have actually been experienced by pension plans."
Tubbergen goes on to say the Dutch plans operate much the same way. Mr. Lawson, quoted in the article, is with the large British insurance company, Aviva. While he has a vested interest in the use of annuities to provide pension income, his statement is spot on. Equities are not a one-way bet. Equities don't just up, they fall as well.
"In today's world, due to the money printing in which central banks have engaged, stock prices are artificially high in my view," notes Tubbergen. "When the deflationary forces of debt overtake stimulus actions, the Dutch pensions may be cut yet again."
Tubbergen concludes by saying, "Over two years ago I began writing about the under-funded pension problems, warning that this story would get bigger and bigger as time passes. That's happening and we're only getting started."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his June 4, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.
About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.