Costs and transaction costs
Pension funds must report the total costs of asset management in euros and as a percentage of average assets under management. The same applies to transaction costs.
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Future Pensions Act (Wtp)A new view on costs
Members will see exactly which returns and costs are allocated to them. This calls for a new way of communicating and accounting for costs by pension funds.
A new view on costs
More transparency, more questions
With the introduction of the Wtp, members have detailed insight into their pension capital and its movements. This means they can follow not only their accrued capital, but also the returns and costs allocated to them.
This transparency is expected to lead to:
- More interest from members in their pension capital
- More attention to the returns and costs allocated to them
- More attention to the investment policy of funds
- Comparisons within pension funds (between age cohorts) and between pension funds, both by members and by the media
These developments call for a new way of communicating and accounting for costs by pension funds.
Costs as the new red flag
A good explanation is essential. Where the explanation falls short, lawyers see costs as the new red flag. The introduction of cohorts and possible cost differences within a single fund increases the risk of questions, complaints and disputes.
What does not change
The statutory key figures remain unchanged
The legislation on the key figures to be reported for implementation costs has remained unchanged. It reads as follows:
Costs per member
As regards pension administration costs, the costs must be reported in euros per member and as a total in euros. The number of members is the sum of active members and pensioners.
For the explanation of implementation costs, the AFM refers to the Recommendations on Implementation Costs established through self-regulation. This explanation enables members to assess costs in context. In other words: what do I get back for these costs, taking account of policy decisions? Consider, for example, returns and service.
Key changes
The contribution takes centre stage, the pension becomes more personal
From the member's perspective, what mainly changes under the Wtp is the way the pension is accrued, invested and ultimately paid out. The contribution therefore takes centre stage. It is important to avoid a misunderstanding here: it does not simply become a freely withdrawable “personal savings pot”. The pension remains collectively organised and risks are shared within the chosen scheme.
Under the Wtp, the personal pension capital and the contribution take centre stage. The investment return has a direct effect on personal capital, so that capital can rise but also fall more readily. There is more attention for guidance on choices.
In this way members get a more personal picture of their pension capital and will want to understand the movements and the outcome critically. In addition, differences between members will arise, particularly in investments. For older members, less risk will be taken when allocating the contribution. For young members more risk is taken, since this is expected to deliver a higher return in the long run.
Amendment 136: a stronger role for the accountability body
Through the adopted Amendment 136, the Accountability Body (VO) or Stakeholder Body (BO) has gained additional rights as from 1 July 2023 where changes to implementation costs are concerned. This means a more substantial role in assessing implementation costs.
Moreover, the VO/BO is asked to advise on board proposals that have major consequences for implementation costs.
What does this mean for governance?
Benchmarking before and after the transition
Test whether expectations have been met
One of the expectations around the implementation of the Wtp was that the complexity of the pension scheme to be administered would decrease, and with it the cost of pension administration. Asset management costs are likely to change little, although younger members may be allocated slightly higher costs because of leverage. Such differences are readily explainable, provided they are placed in the context of the chosen lifecycle and the associated investment strategy.
An additional advantage of benchmarking before the transition of accrued pension rights (invaren) is that members understand that cost differences between pension funds are caused by policy choices. In asset management costs in particular, costs differ because of different weightings across asset categories (asset allocation) and whether management is active or passive. Under the Wtp these differences arise within a single fund for the same reason.
We recommend benchmarking both before and after the transition. This makes it possible to establish whether the expectations were correct. And should that not be the case, you are able to explain why costs did not move as expected.
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Baseline before the transition
Record the cost level and the explanatory factors as they applied under the old scheme.
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Measurement after the transition
Make visible which cost movements have occurred in pension administration and asset management.
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Explain and account
Explain why costs did or did not move as expected — towards the accountability body and members.
White papers
Publications on the Wtp and implementation costs
These publications are available in Dutch.
White paper
Wet toekomst pensioenen — Een nieuwe kijk op kosten
What the Wtp means for cost management, transparency and communication towards members.
Download PDF
Special
Wtp en Verantwoordingsorgaan of Belanghebbendenorgaan
The new rights and the stronger role of the accountability body in assessing implementation costs.
Download PDF
White paper
Wtp Compliance Uitvoeringskosten
Compliance around implementation costs under the Wtp: framework, accountability and risks.
Download PDFMore publications can be found under Media & publications.
Costs on the pension statement
Costs on the Uniform Pension Statement (UPO)
We are currently working on this topic. The publication will follow.
Coming soon
Ready for the cost questions that follow the transition?
We help you explain cost movements and make them understandable for the board, the accountability body and members.