As the UK pension industry moves closer to implementing an industry standard cost disclosure template, KAS Bank has suggested that insightful evidence from the Dutch pension market highlights the tangible benefit of a comprehensive cost reporting framework.
KAS BANK conducted an analysis, which found that Dutch pension schemes working under the Forensic Toolkit cost reporting framework realised a significant reduction in costs between 2015 and 2016.
The analysis showed that the average total cost of ownership per pension scheme decreased by 37 percent.
Meanwhile, the average pensions management cost per pension scheme decreased by 31 percent, and the average investment cost per pension scheme decreased by 37 percent.
The findings are linked to the widespread consolidation of Dutch pension schemes and the introduction of a cost transparency framework.
According to KAS BANK, transparency has ultimately enhanced communication around investment decisions across the entire value chain and their service providers.
This includes improved investment strategy decisions, better control of research, and other costs via true value-assessment.
Stichting Pensioenfonds TNO, said: “We have benefited in the sense that now, DNB is reporting all the different pension funds total cost levels.”
“This way, the sector is more transparent and it’s easier to compare our cost levels with various other pension schemes.”
Commenting on average costs, Stichting Telgraaf Pensieonfonds added: “High cost managers have been replaced with lower cost ones that perform similarly.”
“Across the industry, the increased cost awareness has also encouraged pension funds to let go of higher cost (alternative) investment types and instruments.”
Pat Sharman, managing director at KAS BANK, said: "Having supported our pension fund clients in achieving cost transparency in The Netherlands, we’ve taken a leading role in the UK, helping the pension market bed in a new system of cost disclosure.”
He continued: “Research into the Dutch market clarifies cost transparency delivers multiple benefits, including better decision making and ultimately an overall reduction in costs.”
