The chair of Dutch communications watchdog AFM has admitted she struggled with the complexity of pension value transfers when moving to the regulator last year.
Upon moving from her previous employer – the Dutch Railways (NS), where she had been a board member – to the AFM, Merel van Vroonhoven said she had been considering a transfer of her pension rights between the railways pension fund SPF and the AFM scheme.
However, as the information provided by both pension funds was too complex, she ultimately decided not to act at all, she said during the annual symposium of the pensions magazine PBM, last Thursday.
In 2013, Job Swank, a board member of regulator De Nederlandsche Bank (DNB) conceded that he had difficulties comprehending his own universal pensions statement (UPO).
According to Swank, who is also a professor of economic policy at Rotterdam’s Erasmus University, the Dutch pensions system had become far too complicated.
In Van Vroonhoven’s opinion, despite new legislation on pensions communication, the biggest challenge for pension funds was still to get people in their twenties and thirties thinking about an additional pension, and actually start saving for it.
“The new Pension Communication Act isn’t a cure against all illnesses,” she stressed, adding that participants were “insufficiently using the already available digital channels”.
Van Vroonhoven said that the AFM was currently looking into how the pensions industry can digitally increase interest in pensions, and how participants could be taught to take steps themselves, “as this is a good way to keep their interest alive”.
The AFM chair indicated that the regulator was also scrutinising how transparent pension funds were about the risks to participants future purchasing power. “We want to know whether the effect of non-indexation is properly explicable.”
She further said that her biggest worry was that all risks were gradually shifted to participants without them being aware of it.
The new Pensions Communication Act, with its options for a tailor-made approach as well as picturing scenarios, could help to prevent this from happening.
Referring to the nation-wide debate about a new and sustainable pensions system, she reiterated that the AFM favoured fewer mandatory elements.
Increased freedom of choice should, for example, apply to the contribution level, but not allow people to choose their pension fund or to invest individually, she pointed out.