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AFM: pension advice to SMEs needs to improve considerably

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Advice on pension insurance to SMEs needs to improve considerably. This is evidenced by a random check conducted by the Netherlands Authority for the Financial Markets (AFM) into advice provided on directly insured schemes. Financial service providers who advice SME entrepreneurs on this complex product in general seem to  have too little experience with and knowledge of this type of product. The AFM therefore introduced guidelines for a high-quality pension consultancy process last Wednesday. The AFM will also conduct a follow-up investigation pursuant to the abuses that have been identified. Where necessary, the AFM will take enforcement action.

In addition to the drafting of guidelines for a high-quality pension consultancy practice, the AFM advocates increasing the professional requirements with respect to pension consultancy. Preferably by means of a separate permission  on Pensions in the Wft. The AFM expects to publish the comprehensive results of the investigation in the autumn of this year.
Bad consultancy may mean that SME employees wind up with pension schemes that do not comply with the expectations raised. This concerns consultancy on directly insured pension schemes, which are pension schemes directly concluded with insurance companies. This consultancy falls under the consultancy rules contained in the Act on Financial Supervision (Wft). The random check did not investigate industry-wide pension funds.

Pension schemes are an employment condition agreed between the employer and the employee. The employer is assisted by a (pensions) consultant. Both the employer and the employee are, with respect to a solid scheme, therefore dependent on sound advice to the employer. Bad advice will not necessarily lead to a bad scheme, but does increase the chances thereof. Employees have to carefully read their Uniform Pension Statement (UPO), which they receive annually, in order to determine whether their pension meets with their expectations. They can then take additional measures if necessary.

The AFM started Wednesday sending the consultancy guideline to directly insured pension scheme consultants. The consultancy guideline consists of guidelines on ten subjects that form part of the consultancy process. A new guideline will become available approximately every three weeks. Pension consultants who do not automatically receive the guideline, and other interested parties, can download it from the AFM website. See the link on the right side of this page. The AFM wishes to provide financial service providers, by means of the guideline, with information they can use to improve the quality of their pension consultancy and possibly implement changes that are necessary pursuant to the Act.

The random check focused on the advice provided to the employer. The following aspects were examined in this context:

  • The extent to which the employer receives suitable advice. 
  • The information that is provided to the employer during the consultancy process. It is important in this context that the employer is informed of, inter alia, the premium(s), the costs, pension accrual and the risks run by the employees and the employer. This analysis did not examine the amount of the costs charged by insurance companies.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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