Pensions from Dutch DC schemes overestimated by as much as 25%

05 January 2012 (PLANSPONSOREurope.com) - Dutch Pensions from Defined Contribution (DC) pension schemes are being overestimated by as much as 25%, with providers failing to fully acknowledge the impacts of costs and overly-optimistic forecasts on benefit expectations, according to a report from LCP.

The report compares the investment funds used by Dutch DC schemes and the charges levied on the schemes by their pension providers, examining the total expense ratio (TER) and performance of six Dutch insurers and two "Premium Pension Institutions" (PPIs).  Meanwhile a further measure - the TER+ - has been introduced which includes all costs relating to an investment fund which may not be included within the traditional TER, such as the insurer's asset management costs.

Evert van Ling, partner at LCP Netherlands and author of the report said: "We have introduced the concept of the TER+ to give scheme members a transparent view of the total investment costs they should expect to see impacting their pensions.  This is particularly important as higher costs can result in substantially lower pensions for members.

"A quarter of the investment funds analysed in the LCP report had a TER+ of 1.0% or more. To put this into context, an increase to the TER+ of just 0.5% could result in a reduction to the final retirement benefit of between 3% and 11%, depending on the number of years an individual has left before they retire.