On 26 June 2012, the Minister of Social Affairs and Employment sent recommendations concerning pension communication to the Lower House. The AFM endorses the recommendations, but it does ask for additional attention on several important subjects.
The AFM is pleased to see that the interests and needs of pension participants are the central focus of the recommendations. It is important that pensions participants gain more insight into the amount and sufficiency of their pensions, so that they know whether it is necessary to take additional measures. Good communication is essential, especially in a changing world (of pensions) in which presumed certainties prove less certain than previously thought.
The renewal of the communication provisions of the Pensions Act (Pw) and the Occupational Pension Scheme (Obligatory Membership) Act (Wvb), which together form the basis of the recommendations, can make a significant contribution to the insight of participants into their pension situation. The AFM expects that the introduction of the pension dashboard and the pensions leaflet will ensure that participants are more aware of what they can expect as regards the amount of pension they will receive. The AFM also considers a more prominent role of communication concerning the risks inherent in the pension scheme to be of major importance, as it has previously indicated in its Pension Risk Analysis report.
In the vision document of 11 May 2011, the AFM made the recommendation to display pensions in net amounts, to create more possibilities as regards digital pension information and to provide information on the basis of life events. We are pleased to see that the recommendations endorse our proposals in this area.
The AFM asks that additional attention be given to the following subjects that are only partially dealt with in the report of the Ministry of Social Affairs and Employment:
A mandatory quality indication for pension schemes
Participants must be aware of the quality of their pension scheme, so that they can take any extra action in a timely manner, in the case that their pension scheme is somewhat disappointing. There are significant differences in the quality of the various pension schemes resulting in highly varying pension outcomes for the participants (see the AFM report Pension Risk Analysis). The information currently being provided by pension administrators does not sufficiently enable participants to form an opinion of the quality of the pension scheme. The information is too complex, too extensive, the schemes cannot be compared and it is too fragmented. Participants are unable to interpret the available information independently. Participants lack understandable and concise information that provides insight into the quality of the pension scheme in a simple manner. That is why the AFM argues for a mandatory and comparable quality indicator for (parts of) all pension schemes.
Standards ‘accurate’ and not ‘misleading’ included in legislation
Participants must be able to base their financial planning on the information they receive from their pension administrator. Participants must therefore be able to assume that the information they receive is accurate and not misleading. The AFM has established, however that the information is not always accurate (see for example the AFM report 'UPO Accuracy Report’ from 2010). The DNB also recently observed in its Quinto-P investigation (2012), and previously in its Quinto-V investigation (2011), that the accuracy of pension administrations is not fully in order. The AFM is therefore in favour of adding the terms 'accurate’ and ‘not misleading’ to pension legislation. The AFM also argues that all information that a participant receives from his pension administrator has to be understandable, accurate and timely, and not just the information required by law.
Pension administrators are allowed to help participants make a choice
Pension administrators should have more options to provide participants with insight into their pension situation (as part of their financial planning) and into the choices offered by the pension scheme. Many pension administrators would like to do this, but are cautious because they are afraid that they will be issuing advice and come under the Financial Supervision Act (Wft). A clear explanation of what is and what is not allowed can provide the necessary clarity in respect thereof. The AFM’s Guideline Communication Pension Administrators and the related report entitled ‘A next step towards pension insight’, contain several starting points for this purpose. Many pension administrators nevertheless would like to have more legal certainty. The AFM therefore argues in favour of laying down in law the options available to pension administrators in this respect.
- Letter from the Ministry of Social Affairs and Employment to the Lower House (Dutch language)
- Report: Pensions in clear language (Dutch language)
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.