Market Mechanics: Dutch pension reform

On 20 May 2025, the Dutch Parliament narrowly rejected a proposal (73–72) that would have allowed individuals to vote on opting out of the country’s transition from Defined Benefit (DB) to Defined Contribution (DC) pensions. The proposal, backed by opposition parties, was not intended to stop the reform but to give individuals more choice.

The rejection confirms the government’s plan to proceed with the full DC transition by January 2028, impacting around €1.2 trillion in pension assets—one of the largest pension reforms globally.

Markets reacted with a steepening of the EUR yield curve, particularly at the long end, due to speculative flows. A reversal of these moves may occur following the vote outcome.

Looking ahead, Cameron Shaw, Portfolio Manager at Ardea in London, believes the structural impacts of the reform will include:

• Steepening of the 10s50s yield curve in Europe as Dutch pension funds sell 30-50y duration to buy 10-15y
• More volatility in the long-end of the EUR curve, as the biggest backstop/buyer of long-dated EUR duration has become a seller
• More grey hairs for governments in Europe as the Dutch transition coincides with large net bond supply with QT (€1 trillion over 2025/26) and the start of Germany’s €500bn fiscal spending
• Widening of basis spreads (ESTR/EURIBOR, tenor basis) on large Dutch swap unwinds
• Some support for risk assets as around €100 billion expected to shift into growth assets like equities and private markets.

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