The solidarity reserve is a new instrument within the new Dutch pension system. Most pension funds intend to use the solidarity reserve to avoid nominal reductions in current pension payments as much as possible (De Groot and Bakker, 2022). Many pension funds plan to implement a structure where all age groups contribute to the solidarity reserve, but mainly retirees receive payouts from it. This approach appears to involve a structural “redistribution” of financial resources from active workers to retirees—essentially, a redistribution element.

This paper provides a quantitative analysis of the research question: does the solidarity reserve exhibit characteristics of redistribution financing, and if so, what is the quantitative magnitude of these effects? We use the value-based generational accounting method. For each age group, we quantify the value of contributions to the solidarity reserve over their lifetime (“ex ante”) and compare this to the value of payouts from the reserve over their lifetime. This paper presents results for various scenarios and examines sensitivity to different fund characteristics, such as the age composition of participants and the chosen investment strategy.

Sliem el Ela is a PhD student at the University of Amsterdam. He studied Theoretical Physics and Mathematics at the University of Amsterdam and obtained his MSc degrees in 2023. His research focuses on optimal intergenerational risk sharing with reference-dependent preferences. Next to his research at the University of Amsterdam, Sliem also has a part-time role as Head of Research & Development at Pallas Athena Group. The research he supervises is focused on how to improve education and teaching in the context of the education support industry.