NETHERLANDS - Suggestions that banks can offer deferred annuities for pensions much cheaper than insurers is ‘pure nonsense’, says Fred Romijnsen, a director of insurer Aegon.
“Both banks and insurers need to meet the same legal requirements for deferred annuities,” Romijnsen stated in daily Het Financieele Dagblad. “Both have to deal with longevity risks and need to supply their customers with more advice than for a simple savings account.”
The Aegon director was referring to the recent initiative legislation of two Members of Parliament – Staf Depla of the Labour Party (PvdA) and Bibi de Vries of the Liberal Party (VVD) - aimed at ending the insurers’ monopoly in selling deferred annuities. The MPs claim that banks can sell the annuities at a cost of 1%, as against 7% charged by insurers.
“Banks are aware of their additional obligations, and are applying them in their role as intermediary at the sale of deferred annuities,” Romijnsen added. “This is costing the banks more than 1%, and therefore they charge more than 1% as agents as well.”
“But despite that, they are selling large numbers of deferred annuity products as an agent -- they have not developed these products themselves,” the director continued. “The reason is that a deferred annuity is more than a simple savings account. It must meet the many conditions set by the government, tax authorities and industry regulators, which costs money. That’s why the MPs’ comparison does not work.”
He went on: “Deferred annuities mean the banks would have to spend money exercising their duty of care towards the customer, giving them advice and checking their fiscal position, and other things they need to take into account. You just can’t stop paying when the client reaches 75.”
“We don’t know where the MP’s figures originate,” says spokesman Michel Noordermeer of the Dutch Association of Banks. “Our members do not have the products ready yet. It’s up to them how to deal with the new market. We are pleased with the initiative, because the increased competition will benefit the customers.”
A spokeswoman for Depla says the figures came from the National Planning Bureau, (CPB), and the Netherlands Competition Authority (NMA). “The main aim of the initiative legislation is an increase in competition,” she said.