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Dutch watchdog calls for mandatory 'pensions MOT'

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The Dutch regulator for pensions communications (AFM) has called for a mandatory periodical check that must provide insight into workers’ expected financial position at retirement.

Speaking at the Dutch Pensions Federation’s congress, AFM chair Merel van Vroonhoven said the “pensions MOT” would encourage people facing a shortfall to take additional measures.

She said a recent pilot study of five industry-wide pension funds had shown how difficult it was to adjust schemes’ pensions targets to more “realistic” levels and convey this message to participants.

“The participants are angry, as pension funds no longer live up to their initial promise of a guaranteed pension,” she added.

Van Vroonhoven announced that the AFM and Dutch pensions regulator DNB would investigate another 137 pension funds to check whether their communication on indexation and rights discount matched their financial set-up.

As a next step, the schemes will be expected to transform participants’ overly optimistic expectations into “oversight and insight”, she said.

Van Vroonhoven said a recent Leiden University survey had found that one-third of workers would receive a pension that fell short of their expected spending needs, and that only 35% were addressing the problem through additional saving.

The AFM chair concluded that additional behavioural research, as well as financial education for children, would be necessary.

Also at the congress, Kick van der Pol, chairman of the Dutch Pensions Federation, cited a survey by Motivaction to illustrate the dilemma pension funds are facing when designing a communication campaign.

The survey suggests half of pension fund participants, including many young workers, would prefer a guaranteed pension of 50% of their last earned salary.

The other half, however, including many older employees, prefer an uncertain pension of 70%.

Van der Pol said the biggest challenge was explaining to participants that taking investment risk was crucial for a higher pension, but that full certainty of a higher pension did not exist

The federation’s chairman announced a new information campaign targeting pensions awareness of workers between the ages of 30 and 40.

“We will invite them through all social media to visit our dedicated website www.detijdvanjeleven.nl,” he said.

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