DENMARK - Danish occupational pension fund AP Pension has thrown doubt on the industry's new voluntary guidelines for disclosing costs to customers by suggesting they could just confuse people.

Forsikring & Pension, The Danish Insurance Association, issued a set of voluntary guidelines for pension providers last month, to show their customers the real cost of products.

"AP Pension welcomes the new rules," said managing director Hans Boye Clausen.

"We like to see all desirable information accessible to customers. But there is a risk with the new proposal. Access to a lot of information should give customers more insight, but we are afraid that out-of-context investment costs will confuse them instead," he said.

Seeing investment costs has no meaning if they are not given in relation to the return, he argued, and pension plans in Denmark have been criticised for a lack of transparency over costs.

When it unveiled the new guidelines, Forsikring & Pension admitted showing an individual customer the direct and indirect costs of saving in a pension was complicated in cases where the pension is on a with-profits basis and included a guaranteed future pension income. That said, it it still insisted the new model was the best solution.

AP Pension noted up to now, pensions customers were only able to see the direct costs of their pension scheme, which covered administration and insurance cover. The new guidelines from Forsikring & Pension, however, aimed to show indirect costs as well.

It said: "For traditional pension schemes, this concerns investment costs and the sum that is retained in, or taken from, the common fund to cover deposit yields and insurance payments. For unit-link pensions, this mainly concerns investment costs."

The pension fund said it had asked many pensions personnel in Danish businesses what they thought of the initiative.

"The answers indicate that although this is a step in the right direction, it could be a lot better," said fund officials.

"The pensions staff say that the new way of showing costs will be hard for individual pensions customers to understand, as they often lack insight and interest in the subject," said AP.

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