Dutch financial communications watchdog Autoriteit Financiële Markten (AFM) has demanded new legal requirements for defined contribution (DC) products developed by pension funds to ensure “safe, cost-efficient and comprehensible” plans.
In a letter to Wopke Hoekstra, the finance minister, the watchdog said that its current mandate for the supervision of product development was limited.
Binding rules for DC products are already in place for insurers and the low-cost DC vehicles known as PPI.
In the AFM’s opinion, such requirements were vital because in DC plans the risks were with the participants who, following new legislation, also faced difficult choices about whether to opt for drawdown arrangements at retirement.
As part of its supervision of insurers and PPIs, the AFM checks whether new pension products take the consumer’s interest into account, and define their target groups.
In addition, it makes sure that the product functions in accordance with its aims, and whether suppliers provide proper information.
The AFM also said it had found “points of interest” regarding DC products from six pension insurers, including issues about accuracy, clarity and balanced information.
The regulator said it would consult the ministry of social affairs and De Nederlandsche Bank.
Yesterday, the Dutch Association of Insurers (VvV) announced an initiative to improve the comparability of DC products, in particular regarding communication and the product selection process.
In a position paper, VvV said it wanted its members to provide uniform information about risk and use equal norms and standardised questionnaires to assist participants in picking the right option.
The VvV also advocated the introduction of the option of a one-off switch, from variable to fixed annuities or vice versa, for pensioners whose financial position had changed since retirement.