Pension funds must denounce bonuses to restore faith – survey

Pension funds wishing to win back their participants’ trust must denounce bonuses at asset managers and the companies in which the schemes have invested, Mercer Netherlands has said.

Dutch pension-fund participants, when asked in a Mercer survey what schemes should do to restore confidence in the industry, said they should reject bonuses more emphatically.

Tim Burggraaf, a partner at Mercer, said participants expected pension funds to make a real effort to drive down bonuses.

“Pension funds can do this by using their clout or, as a last resort, leaving their managers,” he said.

He said he did not believe changing managers in such circumstances would necessarily come at the expense of returns.

“If it is the case, however, it would be a good idea for pension funds to give participants the option of choosing principle over returns.”

Burggraaff said the “bonus issue” was part of a broader message from participants – “who seem to demand that pension funds deal with their money in a decent way, which includes sustainability and less risk-taking”.

Mercer, which interviewed a “representative group” of 823 participants, found that sustainable investment was particularly important to over 66s.

Participants between the ages of 30 and 65 also prioritised clarity about their future net pension income.

The latter group said it would also like pension funds to take less risk when investing their assets, preferring lower, but more stable, returns.

The survey suggested workers of less than 30 years prioritised the option of choosing their pensions provider.

Younger employees also rated highly pension funds’ ability to provide insight on participants’ personal financial situation, as well as freedom of choice in the benefit phase, Mercer said.

The consultancy found that participants’ faith in their pension funds hardly improved over the past year, with respondents rating their schemes at an average 5.9 points out of 10, and one-third categorising their schemes as ‘inadequate’. 

In addition, 26% of participants said faith in their pension funds had fallen, while 7% said the opposite.