Pension funds are doing well in solving disputes with their members, and they are even improving. This is the view of Dutch Pensions Ombudsman Piet Keizer. “There is a clear trend towards better information and dealing with members’ complaints. A growing number of funds have their own complaints’ schemes, which they seem to apply carefully,” he told IPE.
Actually, Keizer is still surprised about the ‘relatively low’ and fairly constant number of complaints that pass his desk each year. From a total of almost 6m active members and over 2m pensioners, merely 600 on average seek his authority for arbitration or guidance. “Almost all cases get solved eventually,” he states.
According to Keizer, there was no concrete reason for establishing a Dutch pensions ombudsman 10 years ago. “It was more the spirit of the time then,” he says. “The Association of Industry-wide Pension Funds vb and the Foundation for Company Pensions Funds opf took the initiative, because they felt that members should have the possibility to have their issues ‘in reasonableness and in fairness’ checked against the correct application of their fund’s rules.”
The ombudsman’s authority only covers the members of VB and Opf. Members of occupational pension funds (eg dentists, physiotherapists and musicians), and people who have their pensions directly with insurers, can’t appeal to his services. His right of say doesn’t apply to the regulations themselves either. “I accept their rules as a fact, even if I personally don’t agree with the contents,” he stresses.
Keizer started as ombudsman two years ago, when he took over from Job de Ruiter, a former justice minister, who had been in the job for the first eight years. Previously Keizer had spent 18 years at the Pensioen en Verzekeringskamer PVK - the forerunner of the present pensions regulator DNB - where he was supervisory secretary and board member consecutively.
Issues like claims, calculation and information are the most numerous complaints being dealt with by the ombudsman’s three-strong team. Information topped the list in 2004. Piet Keizer is not surprised. “The pension funds are supposed to supply a comprehensible story about a very complicated matter, not least because of the usual exceptions, transitional schemes and retroactive provisions.”
Last year members lodged dozens of complaints about the transitional schemes for pre-pension. “Many considered it as unjust if they couldn’t join because their employer had changed pension funds, or if there had been a short interruption in their employment without them being responsible for it,” Keizer explains. “Although they have my sympathy, I can’t do anything for them unfortunately.”
The fact that the number of complaints on the inflation-proofing of pensions hasn’t risen, has slightly surprised the ombudsman. “The pensioners must have understood that the developments on the financial markets, and the following instructions from the regulator, made limitation of the indexation inevitable,” he says.
“Many complaints are caused by the fact that people don’t understand what they read. In many cases a problem is solved by just explaining the message. That’s why I think both the pensions industry and the government should take on board that more simple schemes are a much better solution than continuously explaining complicated issues”.
The Dutch Pensions Ombudsman, who has colleagues in the UK and Belgium, has found that most problems are due to the administrative process at pension funds. “Mistakes are being made, and sometimes it takes months before a scheme responds.”
Although almost all complaints are being solved eventually, it doesn’t always go smoothly, Keizer has found. “Quite a few times the schemes don’t immediately share my view,” he states. “Convincing them that they have made a mistake is sometimes difficult, let alone making them face the consequences. Incorrect information about the benefit itself still happens too often. Pay-back proposals seldom contain some sort of compensation for people who already receive their pension. Often schemes take their rules too literally, at the expense of the reasonable interest of the members.”
The Pensions Ombudsman does, however, see several reasons for moderation as well. “Of course I only spot a tiny proportion of what is going on,” he says. “And neither do I see the conflicts being properly solved by the pension funds themselves. Moreover, I am afraid that there are also undiscovered mistakes which don’t lead to a complaint.”
A discrepancy observed by the ombudsman is that a lot of people apparently are having so much faith in their pension fund, that they don’t bother to check the scheme’s calculations, “not even the basic input. On the other hand, they ask me questions rather than their scheme, because they think they won’t get the right answer from their pension fund.
“But, in general, pension funds act very reasonable,” says Keizer. “In more than 50% of all cases, we find that schemes have acted correctly. We only had to go to court once to solve a problem during the past 10 years. The decision was not only in line with our view, but the court told the scheme to act accordingly. Once the arbitration has led to a solution, the schemes stick to it.” The Pensions Ombudsman had to formally advise pension funds on serious problems just four times in total .
Despite the quite rosy picture, the ombudsman doesn’t expect to become superfluous soon. He is convinced of the lasting usefulness of his function, but without major changes of direction though. “Even with the best information available, there will always be people who don’t grasp the message from pension funds. And the schemes will keep on making mistakes.
“Being independent, I can deliver an objective judgement. It happens quite a few times that people approach me for checking the information provided by their pension fund.”
Keizer sees an extra role in education, in addition to complaints mediation. “Pension funds will benefit from this as well, because it will keep them on their toes,” he says. “I have found that our information is already being used in brochures and reply letters from pension funds.”
Within this context the ombudsman likes to encourage the pension funds to inform their members of their situation at milestones of change during their lives, for example, a divorce or a change of job. “A statement at these key moments would be a great contribution to the communication as prescribed in the new Pensions Bill.” In Keizer’s opinion, the internet should be allowed as part of the information proces. “But it can never totally replace paper.”
The present wording of the information requirement in the Pensions Bill contains a potential problem for the ombudsman’s job, Keizer thinks. “The communication doesn’t only apply to pension funds, but also to employers. But at the moment I don’t have any authority over employers,” he explains. Keizer has agreed with VB and Opf not to take action for the time being. “We’ll wait and see what happens in practice after the Pensions Bill has come into force.”
The ombudsman values the informal framework of his job, of which the main criteria are reasonableness and fairness. “Moreover, our service is for free, and it has a low threshold. If we receive a complaint from a member of a fund without an internal complaints scheme, we deal with it straight away,” he adds. “Had the Pensions Ombudsman been established by the government, we would almost certainly have had to work within a tight frame of rules.”