The Dutch association for pension funds has expressed its disappointment with the Dutch Authority for the Financial Markets (AFM)’s recent budget for the period 2021-2024 announced this week, as it seems to indicate cost hikes.
While AFM partly blames Brexit for an increase of €114.7m per year by 2024, the Pensioenfederatie believes it has not been sufficiently motivated.
It’s the second time in as many years the Pensioenfederatie complains about regulators De Nederlandsche Bank (DNB) and the AFM about cost hikes. As its first challenge in 2018 has apparently fallen on deaf ears, the organisation is now renewing its call for the government to reintroduce its contribution to the AFM’s costs, an arrangement which was abolished in 2015 in an effort to stimulate the regulator to work more efficiently.
The new budget for the regulator shows costs will be rising every year, from €111.8m in 2021 to €114.7m in 2024.
According to AFM’s previous four-year budget for the period 2017-2020, the regulator’s annual costs should have come down from €96.4m to €94m over the period. However, costs have risen instead. “According to the original projections from 2016, costs will have increased by 22% in 2024,” the Pensioenfederatie noted.
Several pension funds have recently voiced their frustrations about the cost hikes. “The regulators’ bills rise each year. I believe they should be more aware of these increasing costs for pension funds,” Cathrine van der Werf of the occupational pension fund for cleaners told Pensioen Pro recently.
The cost hikes can be partly attributed to Brexit, according to AFM. “In the 2021 budget, there is an additional €4.2m being allocated to supervision tasks deriving from Brexit. We strive to make sure these additional costs will be paid by parties that will fall under the AFM’s supervision because of Brexit,” an AFM spokesperson said. It is not clear, however, whether this will be the case in practice.
AFM also said new European regulations, such as the Pan European Pension Product (PEPP) and the Sustainable Finance Disclosure Regulation (SFDR), also contributed to the higher supervision bill for the pension sector.
Pension funds do, however, only pay 3.5% of the AFM’s total costs, or €3.9m in 2021.
“It’s true that 3.5% is not a high number,” said a spokesperson. “But if you add the indirect costs of asset management and costs for accountants and consultants, which will pass on the increased cost of supervision to their clients, the real costs for pension funds are higher.”
AFM did not exclude further cost hikes for the pension sector as a result of the switch to a new defined contribution pension system over the next few years.
In the new pensions contract, risks are being transferred to individual participants who may also see increased freedom of choice when it comes to their risk profile. This could result in AFM stepping up its supervision of the pensions sector.