Belgian regulator expecting better DC fees, performance disclosure
The Belgian pensions regulator has told the country’s pension funds and insurers they must communicate more clearly about the fees and performance of defined contribution (DC) pension plans.
The Financial Services and Markets Authority (FSMA) has finalised its expectations and recommendations for how pension institutions should communicate about DC plans, and set them out in a document published last month.
FSMA’s guidelines – including examples of good practice – come after it carried out an analysis of the financial transparency of DC schemes. It analysed the regulations, transparency reports and annual pension statements associated with around 100 pension plans.
In one-third of the reviewed plans, the fees charged to the affiliate and the performance obtained were not mentioned in any document. In all cases where the legal provisions were not fully respected, the FSMA intervened with the pension institutions to remedy the situation, it said.
The regulator said it wanted pension funds to provide a detailed and complete description of fees, explaining which are charged to the plan member and how, and which fees are covered by the employer.
FSMA also expected funds’ transparency reports to set out the their short- and long-term investment strategy, including the risks associated with investment portfolios, and the extent to which environmental, social or ethical aspects were taken into account when making investments.
The portfolio’s gross yield should also be disclosed, the regulator said.
In Belgium, employers are legally obliged to guarantee a minimum return on contributions made for DC schemes. FSMA has said that pension institutions’ transparency reports should state the financing level of this return guarantee.
If the pension plan is funded by way of a so-called Branch 21 insurance contract guaranteeing a certain rate of return this, too, needs to be stated alongside other details relating to the contract. FSMA’s analysis found that in many cases this guaranteed rate was not disclosed in documentation made available to members.
Transparency of fees and performance is of growing importance across Europe. Some of the key aspects of MiFID II rules are related to cost transparency, while the UK’s financial regulator has called for greater clarity regarding the costs and performance of fiduciary management providers.
Also in the UK, the government recently proposed regulations for how trustees and managers of occupational DC schemes should disclose information about costs, charges and investment for members’ benefit.