Administration costs of the 10 largest Dutch pension funds ticked up sharply in 2023. Preparations for the country’s new pension law are a major cause of the increase, according to a study by consultancy Bell.
The study, which featured 10 major funds that together manage 69% of Dutch pension assets, showed pension administration costs rose from €88 per participant in 2022 to €99 in 2023 (up 13%). In euros, pension administration costs rose from €553m to €636m.
All funds cited the advent of the new Pension Act as one of the reasons for the cost increase.
As specific cost items, they name, among others, advice, adaptation of administration systems, additional administration costs and improvement operations for data quality.
Pension administration costs have been on an upward trend since 2019. Back then, costs stood at €78 per participant. In 2022 when costs rose by €7 per participant, funds also cited the new pension law as a major reason for higher costs.
Asset management
Despite the increase in pension admin fees, funds spent a lot less overall in 2023. Indeed, asset management costs – a much larger cost item in euros – fell sharply, from 0.45% to 0.40% of average invested assets (-11%).
In euros, these costs went down from €5bn to €4.1bn, as asset managers pocketed much lower performance fees. Adjusted for these performance fees, asset management costs still rose by 0.02% in 2023.
Finally, transaction costs fell from 0.11% to 0.10% of assets (in euros: from €1.3bn to €1.0bn). The total costs of the 10 pension funds thus fell from €6.8bn to €5.8bn.
The cost decrease for the sector as a whole will be somewhat smaller in percentage terms because the large funds invest more in illiquid categories where performance fee structures are more common.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra
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