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Pensions body seeks charges transparency

DENMARK - Forsikring & Pension, The Danish Insurance Association, has issued  voluntary guidelines for pension providers to show customers the real cost of  products.

A new costs model developed by the industry association is designed to give consumers more information about the "hidden" costs of pensions, as plans have recently been the subject of public criticism.

Until now, the association said, individual customers have been able to see what they are paying directly out of their pension saving for administration and insurance, but under the new model, they will also see the costs that the collective fund bears on their behalf, as well as the investment costs.

"The pensions industry has a clear interest in pension customers being as well-informed as possible," said Per Bremer Rasmussen, administrative director of the association.

"We have agreed on a model which allows individual pension customers to see everything they pay for their pension scheme."

This costs model is part of the association's ongoing drive to increase openness and transparency in the industry, said Bremer Rasmussen.

Yet showing an individual customer the direct and indirect costs of saving in a pension is complicated in cases where the pension is on a with-profits basis and includes a guaranteed future pension income, the association pointed out, albeit adding the new model was the best solution.

That said, exactly when providers will start using the new model is unclear. The association said the new pension cost information would require providers to improve their IT, and the speed at which they were able to show the information would vary from firm to firm.

"Pension providers will put a high priority on the cost figures, because it will be a competition parameter whereby good firms can show their costs," said Bremer Rasmussen.

But the Danish Consumer Council, which lobbies on behalf of consumers, has doubts about how effective the code will be in practice.

Overall, the council is positive about the new costs code, as Carsten Holdum, economist at the council said "we now look forward to a good implementation".

His concern is the code is voluntary, and there was significant leeway in how individual providers implemented it.  Similarly, there is fear the information would become less transparent by running to several pages because it was so technical, he said.

"We need to bring it down to a few key figures, but we don't know whether that will happen or not (…) because it is still voluntary," he said.

Costs involved in running pension schemes of all types have come under public scrutiny, with some politicians calling for legislation to bring clarity to the matter.

The Danish Competition Authority has declined to reveal whether or not it was currently investigating openness and pricing in the pensions sector.

If investigations are under way, results of any investigation could be released in the authority's annual report, due to be published in May.

However, the authority was positive about the Danish Insurance Association's initiative on costs information. "We very much welcome increased transparency in this sector," said Jacob Schaumburg-Müller, head of division at the authority.

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