AK: Yes, exactly. I think none of the pension fund systems are robust enough against that. But in our system, we can cut off some at the top. We did that a couple of years ago where you don’t get all these benefits from pensions and taxes if you make more than 100,000 euros a year as remuneration, and we could lower that. If you don’t have to take the top, top, top salaries, that makes the pension system as a whole more affordable and more solid, more robust.

There are some ways to overcome the negatives of our current system. But what will certainly not overcome the negatives is to go individual and to be basically very unprotected.

JF: In the U.S., the place where there are still defined-benefit pensions is mostly with state governments, and there’s lots of pressure politically for the states to go individual, in part because they’ve done a pretty poor job in general of setting aside enough money. It seems like the Dutch and a few other Northern European countries have this unique mix of a sense of “We’re in this together,” but at the same time a really hard-nosed accounting tradition. That’s hard to replicate.

AK: Yes, the majority of the state defined-benefit systems in the U.S., if they would have to apply our regulatory rules, they would be seriously underfunded. It’s very hard to invest your way out of that, so they do need to do something.

If you go individual, that’s easy. You just let go of your responsibility. But basically you’re not only vulnerable for longevity risk, you’re also vulnerable for market risk, much more than in a risk-sharing arrangement. I would encourage those state pension funds to look around in the world and see what alternatives there are that would actually be somewhere in the middle between their current system and a 401(k).

I know it’s hard for people from the U.S. to actually see that other systems might teach them something. But I would encourage them.

JF: There’s definitely something of a movement here to try to push the 401(k) in the direction of a pension, with more default deductions, more contributions by employers, more options for annuitization upon retirement. But in the Netherlands, what you’ve been doing is taking this defined-benefit system and making it a little less defined. During the crisis, how was it adjusted, by not giving inflation adjustments for a couple of years?

AK: Yes, that was the majority of the adjustment, and only in one or two specific cases we cut the pensions, but that was in one year by 1 percent. It’s politically incorrect to say so, but this enabled us to actually catch up with the investments to cover for the rise in longevity risk.

The elderly people were a bit upset that they didn’t get the inflation coverage, but I think that was actually fair. Normally you work for 40 years and you live another 15 years and that’s the fair pension payment. But if you now only work 35 years and live 25 years longer, then of course you get a lot more from your pension than you’ve actually saved in the past.

JF: In both these systems, unexpected things happen -- you have a market crash or life expectancies keep growing. The advantage of a 401(k) system is that it’s supposedly not the government’s problem, although they might end up with a lot of very poor 80-year-olds 20 years down the road. With the defined-benefit system, if you can make adjustments like that, that’s the better way to go. I think the problem with state pensions in the U.S. is that both politics and, in Illinois, the state constitution are preventing them from making even the slightest adjustments.