Invesco: Under the Wtp, pensions will become much more personalised

May 13, 2026

_{This interview was originally written in Dutch. This is an English translation.}

In the new pension system, flexibility plays a much greater role and it is more important than ever to involve members in their pension provision. Georgina Taylor, Head of Client Investment Solutions for EMEA at Invesco, discusses the key lessons from the transition from a defined-benefit (DB) scheme to a defined-contribution (DC) scheme, a shift that the UK pension sector, amongst others, has already undergone.

By Michiel Pekelharing

What changes will the Future Pensions Act (Wtp) bring for pension funds and members in the Netherlands?

‘The transition requires a fundamental shift in mindset. In a defined benefit (DB) scheme, pensions happen “somewhere in the background”. The fund takes care of everything and for the member it feels relatively abstract. In a defined contribution (DC) environment, pensions become much more personal. The focus shifts from the ideal asset mix to a picture of what the desired pension will look like in the future and which investments fit into that picture. Because it will soon be all about the individual wealth that someone builds up.

For members, this can mean they feel more involved in their pension planning. It becomes more tangible, as you see your assets growing and you think about what you ultimately want to achieve with them. At the same time, pension funds gain more scope to take a fresh look at the investment process. For example, you can rethink how to structure the phase in which you reduce risk as you approach retirement. In a DB scheme, you know fairly precisely what total income you need to match, which means the focus is heavily on bonds. In a DC scheme, it’s different. The pots vary from participant to participant, and you actually want to maximise the assets by the time someone retires.’

The United Kingdom has already made the transition to a DC scheme. What are the key lessons for the Netherlands?

‘I have conducted extensive research into the DC system in the United Kingdom over the past few years, but with Invesco we also have many years of pension experience in countries including the United States and Australia. Each of these markets is at a different stage of maturity, with their own dynamics and their own challenges. In the US, for example, you see a highly developed market with a great deal of freedom of choice and a wide range of products, whilst Australia stands out for the strong integration of private markets into DC portfolios and a long investment horizon.

What we learn from this is that there is no single ‘right’ way to structure DC schemes. The key is to develop building blocks that are flexible enough to align with different objectives and participant types. The first lesson, therefore, is that a standard approach is often not the best solution. Instead, we aim to provide a framework within which pension funds can translate their own philosophy into concrete investment choices. Our international experience is a huge help in this regard, as it allows us to see what works – but also what does not work – in different contexts.

A second lesson is that the new pension system must pay greater attention to human behaviour. In a DB scheme, pension funds were primarily focused on calculating how to invest in order to be able to pay out a certain income in the future. In a DC scheme, the choices participants make have a greater impact on their pension income. It is important to involve pension scheme members in the process, so that they can be confident their pension scheme offers them what they need to enjoy their retirement later on. If members are dissatisfied with the results, they could try to bring about regulatory changes across the entire sector.’

Can you give an example of how human behaviour can affect pension accrual?

‘In the UK, a majority of people take advantage of the option to withdraw a quarter of their pension pot tax-free as soon as possible. That money then often ends up in a savings account that yields hardly any return. However, people do not look at the return they are missing out on; they mainly want something that feels like securing their own money because they are afraid that rules might change later. That sort of behaviour shows how important communication and guidance are. It is not just about the optimal calculation, but also about how people actually make decisions.

When you look at it this way, it quickly becomes clear that you need to stop talking about asset classes. It is actually about the question of what pension income you need to live comfortably. It is then up to the pension provider and the asset manager to choose the right investments behind the scenes to achieve that goal. For example, some people want security and a stable income above all else. Others, on the other hand, want flexibility and the possibility of a higher income if investment results are good. You build the narrative around that outcome, rather than talking about the technical details of the investments.’

How should investment strategies change when a system shifts from DB to DC?

‘An important point is that many DC strategies are still designed too much from a DB perspective. You see this, for example, in the glide paths where risk is reduced as the retirement date approaches. Often, these shift very early and very sharply towards bonds. In reality, you often want to maintain exposure to growth for longer. That doesn’t mean you keep taking all the risks, but that you gradually restructure the risk. We see, for example, that some funds are shortening their risk reduction period. The major advantage is that this allows members to continue investing in return-generating assets for longer.

At the same time, in the later phase, you can switch to strategies that still offer growth, but with less downside risk. Think of total return-style solutions. Another important concept is separating the growth and income portfolios. By allowing part of the assets to grow for longer, whilst another part finances the pension income, you can reduce sequencing risk and potentially achieve a much higher pension outcome.’

The Netherlands may have more scope for illiquid investments than other countries. How do you view this?

‘That is indeed an interesting difference. In countries where members can easily switch pension funds, funds must maintain high levels of liquidity. In the Netherlands, this is less of an issue, meaning funds may be able to invest more in private markets. In some respects, this resembles the Australian system, where the allocation to private assets is very high. The key question, however, is not whether you use private markets, but why. What exactly do they add? Is it extra return, diversification or a stable cash flow? If you clearly define that role, they can be a valuable building block. Moreover, our experience is that a large part of a successful DC pension approach lies in a smart structure built around these kinds of building blocks. We offer pension funds the opportunity to combine various building blocks – from growth strategies to income strategies and possibly also external solutions – in a way that suits their philosophy and their members.’

How important is communication with members in a DC scheme?

‘Communication is absolutely crucial. Precisely because members are becoming more involved in their pensions, you need to guide them more effectively. The most effective moments for communication often occur during the period when risk is being reduced. That is when people really start thinking about their financial future. Digital tools play a major role in pension communication. Together with our clients, we consider behavioural nudges – small incentives that help people make better decisions. Personalisation does not necessarily mean that everyone receives personalised advice. It can also involve different communication styles or information formats that suit how people process information.’

Can the Dutch pension sector catch its breath following the system change, or do experiences in other markets suggest that further changes are on the way?

‘An important lesson we have learnt is that the transition to DC is not an end point, but rather the start of a long-term development process. In the United Kingdom, we are now several years on from the major reforms, such as auto-enrolment, but the regulations continue to evolve. The same applies to the United States and Australia. What you see is that policymakers are gradually trying to answer new questions. For example, how do you measure whether participants are getting value for money? What role should illiquid investments play? How do you prevent regulations from inadvertently encouraging herd behaviour?

In the UK, active work is currently underway on this, with new frameworks and consultations that will only be fully implemented towards the end of this decade. Even a relatively mature DC market is therefore still in a state of flux. For the Netherlands, this means it is important to build in flexibility. This applies not only to investment strategies, but also to the way the system is regulated. You want to prevent rules from becoming too rigid too quickly or from forcing certain investment choices. At the same time, it is crucial to leave room for innovation and differentiation between funds. Experience from other countries therefore shows that you should not aim for a ‘perfect end model’, but for a system that can continue to adapt. It is precisely this ongoing refinement – sometimes years after the initial transition – that ultimately determines the success of a DC system.’

When can the pension transition ultimately be considered a success?

‘Success ultimately hinges on two things. It is, of course, of the utmost importance that pension funds actually provide sufficient pension income for members. But there is also a second factor: trust and engagement. If members understand what is happening and believe that the system works for them, you have a strong foundation. I also think it is important that there remains scope for innovation and differentiation between pension funds. If everything becomes completely uniform, the incentive to further improve the system disappears. It is precisely this combination of stability and innovation that will determine how successful the transition ultimately is. In any case, it will be a very interesting journey, in which, with our extensive experience in DC markets, we are more than happy to act as a sounding board for pension funds regarding all the changes that lie ahead.’

www.invesco.nl

Read the full interview in Financial Investigator magazine