Dutch pension funds are set to put pressure on European government bond markets later this year as they start to sell around €125bn of long-dated bonds because of a substantial reform of the retirement sector.
Between 2025 and 2028 the €1.5tn Dutch pension industry is transitioning from a system in which final payouts to pensioners are guaranteed to a defined contribution framework, in which employers are only tied to the amount they put in. That will mean holding much less long-term sovereign debt to back their long-term promises and freeing up more funds to invest in higher-returning assets such as equities and credit.
While a handful have already switched, Dutch funds managing close to half of the total assets that need to be transferred are set to convert in January next year, with managers expected to prepare portfolios in the run-up. Strategists at Dutch bank Rabobank expect €127bn of long-term sovereign debt will be sold over the course of the transition.