Pensioenfonds Detailhandel, the €32bn scheme for the Dutch retail industry, still expects it will manage to reduce administration costs to €15 per member in five years from now. In 2021, costs rose to €90 because of “start-up costs”.

“Fifteen euros per member remains a realistic target, but for this to materialise we will need to reach better efficiencies of scale as well as accept some things when it comes to client servicing,” Snellen told a pension congress organised by IPE’s sister publication Pensioen Pro in Amsterdam on Thursday.

Snellen said that in order to save costs the pension fund’s customer service could be further automated and partly outsourced to low-wage countries.

He said: “I don’t see any barriers to outsourcing low-sensitivity communication. If a member lose their password, I don’t think it would be a problem if they get to talk to someone in India.”

Snellen added he wants to keep servicing “high-sensitivity communication”, such as questions about the partner pension, from the Netherlands.

But if Detailhandel is ever to reach its €15 per member cost goal, it also needs its provider Capgemini to realise more efficiencies of scale in its IT operations, Snellen acknowledged.

“If Capgemini does not manage to bring in more admin clients, we will never reach our cost goal,” he said.

Capgemini told IPE’s sister publication Pensioen Pro last year that it aims to service four million pension participants in the Netherlands over the long term. This is equal to a 20% market share in the country.

At the moment, Detailhandel (1.3 million members) remains the French IT firm’s only pension fund client.

If Capgemini were to fail to find any additional pension fund clients, costs will likely only fall to some €45 per member, according to Snellen. While considerably higher than the original ambition, this would still be well below the €60 per member that Detailhandel’s former provider TKP was charging.

Dutch providers commit to lower costs

As new foreign entrants are looking to eat away market share, Dutch incumbent providers are vowing to reduce costs after the transition to a defined contribution (DC) system.

Paul Everloo, chief executie officer of TKP Pensioen, told the same pension congress in Amsterdam yesterday that its clients will be paying 10% less for DC pension administration.

CEO Monique Sueters of pension provider AZL said admin costs could come down by 30-40% as a result of efficiency gains from digitisation and automation, and because of increasing pension fund consolidation.

Start-up costs

In 2021, costs per member rose to €90 due to the initial costs connected to developing the new administration system which were borne jointly by Capgemini and Detailhandel.

Prospective additional clients would benefit from these investments as they will not need to share in these costs, said Snellen.

“We would still benefit from new clients for Capgemini because the resulting efficiencies of scale would translate into lower admin costs for us. But we have not made concrete arrangements about this with Capgemini,” said Snellen.

Over the next few years, Detailhandel’s admin costs will remain high because of the additional outlays associated with the pension transition. Detailhandel aims to make the transition to the new DC pension contract on 1 January 2024.

From then onwards costs should be coming down to reach €15 by 2027. Or €45, in case Capgemini does not attract any additional clients.

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