Dutch pensions watchdog gives thumbs up on cost transparency guidelines
NETHERLANDS - The Dutch pension communications watchdog (AFM) has said it is satisfied with cost transparency guidelines recently issued by the Pension Federation.
AFM director Harman Korte, who highlighted that the sector itself had taken the initiative on the issue, said: "The pensions sector has made an important step forward toward increased cost-effectiveness.
"Transparency also gives pension funds participants and sponsoring companies better insight, and we expect this will also increase schemes' cost-awareness."
Korte added that he expected the sector would also set a deadline for transparency about transaction costs.
Under the current guidelines, all pension funds must report asset management costs, as the percentage of its assets under management, no later than 2014.
By then, they will also have to publish the costs of pension administration in euros per participant.
In addition, the Pension Federation wants all schemes to provide full transparency of the transaction costs as a percentage of their assets, although the lobbying organisation has not yet set a deadline for this.
Last April, the AFM claimed that pension funds' investment costs were as much as three times higher than pension funds reported and that, as a consequence, as much as €3bn of costs a year went unreported.
After conducting an exploratory survey, the AFM concluded that small and medium-sized pension funds in particular could increase their assets significantly by better managing investment and administration costs.
"A cost decrease of 0.25 percentage points will increase the collective pension assets by 7.5% in 40 years," it said.
Following the AFM survey, the Dutch parliament urged the sector to improve cost transparency quickly.
However, in the opinion of Kick van der Pol, chairman at the Pension Federation, costs are not an issue for the supervisor.
"The price-quality ratio is a matter for a pension fund's board, as well as for its participants council and accountability body," he said.
Bram van Els, spokesman at the €103bn healthcare scheme PFZW, added: "A joint approach will increase the clout of pension funds to get the desired information from their asset managers and make comparing costs easier."
According to Frans Prins, director at the Pension Federation, the introduction of the new guidelines will be carried out step by step, as not all contracts with asset managers allow for an interim adjustment.