##nb. nl, which is open around the clock. how the regulator contributes to sustainability having explained the importance of durability for the dutch pension system, i would now like to take a closer look at the role of the regulator. by exercising supervision, the nederlandsche bank contributes to durable old age pensions and a strong pension industry. supervision contributes to three principles which are related to the themes mentioned earlier, i. e. discipline, transparency and a sound pension industry. these principles are : ( 1 ) identifying risks, ( 2 ) preventing rising deficits, but should these occur, ( 3 ) applying a customised approach to the resolution of the problems, effected as soon as possible. these principles form the foundations of the financial assessment framework. the framework does not prescribe the substance of pension arrangements ; that is the province of the social partners. furthermore, as regulator, the nederlandsche bank is not responsible for the quality of pension arrangements. incidentally, this does not mean that the bank does not have an opinion on what constitutes quality. in my capacity as economic advisor, i have pointed out on several occasions that pension arrangements should include a serious indexation ambition. nominal guarantees are nice, but protection of purchasing power is nicer still. a serious indexation ambition must therefore be at least in line with the ecb ’ s objective of price stability, i. e. around, but not more than 2 % inflation annually. the financial assessment framework contains standards for overseeing compliance with the pension contract. basically, financial supervision addresses the question whether a pension fund ’ s assets are proportionate to its liabilities and prevailing risks. in other words, it seeks to prevent under - funding. this is the foundation of the funding system ; in combination with adequate buffers, cost - effective contributions and sufficiently inflation - proof pensions, it makes for a durable pension system. but even in a sound, durable pension system, under - funding can never be ruled out altogether or only at a very high cost. should an unhoped - for financial disaster take place, a customised plan, which takes into account the fund ’ s efforts to prevent under - funding, and ensures that the interests of the participants are best served will take effect. such a customised plan is set in motion only if the pension fund ’ s management has deployed its instruments to the full, and the employer or the industry involved, have done their utmost. it is important that the problems be solved as fast as is

major principle of our pension system. after all, people trust that pension entitlements, accumulated during their active life, are paid out upon retirement. a recent survey by the nederlandsche bank shows just how much they value pension security. nearly half the respondents are prepared to pay a higher pension contribution for more certainty about their eventual pension benefit. only one in five participants opts for an arrangement without guarantees ; the remainder are indifferent. it was noted that pension fund managers and participants may disagree on this point. in the dutch system, transparency also means being open about the pros and cons shared with future generations. future generations are stakeholders because they, too, will join the pension system at some point in time. with a view to the continuity of the system, access should be and remain attractive. in other words, sustainability also means that the needs of the current generation are not met disproportionately at the expense of future generations. risk - sharing within and between generations forms an essential element in the collective dutch pension system and offers many advantages. it makes the pension system more stable and more durable. after all, pension arrangements are about spreading risks, the main risks being : longevity risk, inflation risk and investment risk. when these risks are spread widely and over time, all participants stand to gain in terms of prosperity : in economics, this is known as a pareto improvement. where pensions are concerned, this advantage is reflected in a stable income pattern over the individual ’ s life cycle. the prosperity gains of our collective system should not be taken for granted. spreading risks among generations works so long as future generations are not saddled with an unduly heavy burden ; if they are, a funding system will be confronted with an unsustainable situation sooner or later. new entrants facing a situation where they are required to pay disproportionately more for their own pensions over a long period of time will vote with their feet. or the mandatory nature of the pension system will be called into question. to prevent this from happening, discipline is needed so as not to overburden future generations, and transparency to keep up support for the distribution of the advantages and the disadvantages. a sustainable pension system stands to benefit from a durable distribution of the pluses and the minuses. a durable pension system depends on a strong pension industry this brings me to my third message. apart from discipline and transparency, a durable pension system calls for a strong pension industry