Cost transparency of pension funds Dutch experiences 2011-2018 San Francisco, 11 September 2018 Jose Meijer Vice-Chair, Board of Trustees

Goals of costs transparency in the Netherlands Cost transparency will help to improve trust in pension funds. Cost transparency encourages trustees to take costs into account when taking policy decisions. What’s get measured gets managed Don’t be penny wise, pound foolish. Costs are the result of policy, investment beliefs, size, risk appetite, etc.

Cost transparency of pension funds 2011-2016 November 2011: Federation publishes the Recommendations on administrative costs of pension funds. Self regulation to become transparent on costs. January 2015: New Dutch legislation which obliged pension funds to publish costs figures. February 3rd 2016: Federation publishes revised Recommendations to improve definitions and comparability. You may find our Recommendations on our website: www.pensioenfederatie.nl Dutch experience may be used in other countries. Please make use of our ideas. CWC did so in the recent published CWC brief.

Recommendations, now legal requirements Pension funds have to report in the annual report: The costs related to pension management in euros per member. The asset management costs as a percentage of the average asset under management. In addition, review these costs in relation to: On a separate basis, report the transaction fees as a percentage of the average assets under management.

Generic recommendations (1) Matching principle Both costs and returns are attributed to the period to which they relate. Look through principle Asset management costs and transaction costs within an investment fund are pro rata incorporated in the total costs of the pension fund. No offsetting of costs against returns Costs are reported in an transparent way. For example, revenues from security lending is not deducted from the custody fee.

Generic recommendations (2) Non-recurrent costs are incorporated in total costs. Practical feasibility and estimations It is not advisable to spend a disproportionate amount of time on achieving precision and transparency down to the last euro. Taxes (VAT and transaction tax) are integral part of the costs they relate to. All Recommendations are subject to the `comply or explain´ principle, except where compliance is mandatory under legal and regulatory requirements.

Development of cost level in the Netherlands Although not the primary goal, asset management costs went down over the last five years.