Because pension funds also provide little detail about their costs, it is also hard to understand why the cost levels of pension funds vary so widely, according to AFM. The regulator based its conclusions on an investigation of the 2019 annual reports of 166 pension funds. It found reporting mistakes with 90 of these funds.
Dutch pension funds are required by law to report separately on three cost components: administrative costs, investment management costs and transaction costs. They should publish both the costs in Euros of all these three components, but also as a percentage of assets under management (investment management and transaction costs) or per member (administrative costs).
According to AFM, “20% of funds do not report all the mandatory cost metrics, which makes them in violation of the law”. In most cases (29) the missing data involves transaction costs, although there were also six funds that failed to report all the required data on investment management costs and four funds that did not provide all mandatory information on administrative costs.
0.6% of AuM on average
An average Dutch pension fund spends 0.6% of its assets under management on administrative costs, asset management and transaction costs, the AFM has found. The total cost bill for Dutch pension funds adds up to €9bn a year, according to the regulator.
While total administrative costs come down once pension funds grow bigger as these are calculated on a per-member basis, AFM did not find a relationship between the size of a pension fund and their investment management costs. Investment management costs varied between 0.10% and 0.80% of assets under management. There are both small pension funds with very low costs as well as very large funds with higher-than-average costs.