Report says 17% of annual pension premiums goes on costs

Tuesday 02 October 2012

Employers and workers lose an average 17% of their annual pension premiums because of the costs of running the fund, according to a survey by actuarial advisors Lane, Clark & Peacock.

'Costs are higher than necessary,' Jeroen Koopmans of LCP told the Financieele Dagblad. 'And pension funds are missing possibilities to cut their costs.' LCP bases its research on the annual reports of 219 pension funds.

The funds looked at by LCP manage 99% of the total Dutch pension capital. Employers and workers pay an annual €30bn in pension premiums, says the FD.

The cost of administration, capital management and investment transactions can have a huge impact on pensions. A saving of one percentage point on the costs can result in an increase in capital of 30% in the long term. A pension of €1,000 a month would then increase to €1,300 a month, Koopmans told the paper.

Differences

There are large differences between funds of the same size, said Koopmans. He mentioned two which both have around 13,000 participants. One of these funds charges total costs per participant of €51, while the other charges €533.

He would not name the funds in question because they only took part in the survey on the condition of anonymity.

In a reaction, the Dutch pensions federation told the FD there are many aspects that explain the differences in costs between funds, such as their size and the variation between an active and a passive investment policy.

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