Towards Better Legal Protection for Pension Scheme Participants

An Exploration of Complaint Handling by Pension Funds

Publication Date: 18 March 2022

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Towards Better Legal Protection for Pension Scheme Participants

Table of Contents

Table of Contents 2

1 Summary 3

2 Background and Objectives of the Research 5
2.1 Background of the Research 5
2.2 Objectives of the Research 6
2.3 Research Methodology 7
2.4 Guide to Reading 8

3 Findings and Recommendations 9
3.1 A Uniform Definition of 'Complaint' is Missing 9
3.1.1 Differences in the Definition of Complaint 9
3.1.2 Volume of Complaints 11
3.2 Reporting on Complaints in the Annual Report 11
3.2.1 Reports on Complaints in the 2020 Annual Report 12
3.2.2 Complaints in the SLA 15
3.3 The Complaint Procedure 16
3.3.1 Findability of Complaint Procedures 16
3.3.2 Accessibility of Complaint Procedures 17
3.3.3 Understandability of Complaint Procedures 18
3.4 Good Practices from and for the Sector 20

4 Experiences of Participants 22

Appendix: Complaints in the Pension Act? 25

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Towards Better Legal Protection for Pension Scheme Participants

1 Summary

Pension scheme participants must be able to trust the information they receive regarding their pension. If the information about their pension is incorrect, this can lead to inappropriate choices, disappointment, and a loss of trust. Furthermore, when participants have questions or complaints regarding the information received, they must be able to express this to their pension provider. For these reasons, the AFM (Dutch Authority for the Financial Markets) has recently conducted two investigations. The first investigation concerns the quality of the pension administration of pension funds and the information provided based on that administration.

The second investigation concerns the findability and accessibility of the complaint procedures of pension funds. The results of this latter investigation are found in this report.

It is important that participants, regardless of whether they are building up their pension with a pension fund, a premium pension institution, or an insurer, can enjoy and receive similar legal protection and the rights to which they are entitled. The AFM concludes that this is not always the case in practice, and that the complaint procedures of pension funds may contain barriers for participants wishing to submit a complaint. This report contains the findings and recommendations from the research into the complaint procedures of pension funds.

The AFM observed in its research a number of complaint procedures from pension funds that are trying to remove barriers as much as possible. For example, by offering the possibility to submit complaints in the most low-threshold manner possible or by adapting the information about the complaint procedure to their own population. This report includes a number of these good examples.

Pension funds use varying definitions for 'complaint', ranging from a low-threshold definition (any expression of dissatisfaction, regardless of how it is communicated) to a more legally oriented, bounded definition. This research shows that this definition has consequences for the level of access a participant has to their pension fund's complaint procedure. These differences in definition also lead to different ways of reporting to the pension fund board. The AFM observes, for example, that some boards only have visibility on complaints related to courtesy requests on which the fund board must decide, or that only complaints that were not handled to the participant's satisfaction are reported to the board. In this report, the AFM recommends that every expression of dissatisfaction by the pension fund be considered a complaint. This includes, for example, complaints that fall outside the responsibility of the pension fund, such as those regarding the statutory increase of the pension age. Information about all expressions of dissatisfaction is useful for pension fund boards, so that they have visibility on what is happening within the participant population and on the components (including communication) where they can implement improvements.

Furthermore, the AFM observes differences in the extent to which complaint procedures are findable for pension scheme participants (for example, via the website) and how easy it is made for a participant to submit their complaint. The results of this research also align with external research conducted among participants by the AFM; this shows that participants indeed experience barriers when submitting their complaints to pension funds. The AFM notes that almost all pension funds currently have a publicly findable complaint procedure. However, the AFM observes differences that contribute to the fact that it is not equally easy to submit a complaint at every pension fund. Based on its findings, the AFM makes several recommendations to the sector. By following up on these recommendations, pension providers enable their participants to submit their complaints in a low-threshold manner. It is also in the interest of the pension provider to have full visibility of the dissatisfaction existing among their participants. This allows them to explain complaints, resolve them, or use them to improve their own service delivery.

The AFM shares its findings and recommendations in this report. Additionally, this report contains some good practices that the AFM has observed in the sector. The recommendations aim to take a step towards greater legal protection for participants of the various pension providers. This is important as the sector stands on the eve of the pension system revision. It is important to safeguard the position of participants now, both during the transition period and structurally thereafter.

Furthermore, based on its findings in this report, the AFM calls on the legislator to include statutory safeguards regarding the complaint procedures of pension providers in the Pension Act.

1. Where 'participant' is stated in this report, it can be read as active participant, former participant, and pensioner for the sake of readability, unless explicitly stated otherwise.
2. https://www.afm.nl/nl-nl/professionals/nieuws/2022/februari/pensioenadministratie-pensioencommunicatie.

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Towards Better Legal Protection for Pension Scheme Participants

2 Background and Objectives of the Research

2.1 Background of the Research

A large-scale revision of the pension system is taking place in the coming years. The transition to the new system has consequences for all pension scheme participants, and they must be included in this process in a careful manner. The AFM finds it important that participants in pension schemes can express their complaints or concerns to their pension provider and that they enjoy sufficient legal protection, both during and after the transition. With the transition in view, now is a suitable moment to pay extra attention to complaint procedures at pension funds. The complaint procedure is one of the ways in which pension scheme participants can provide feedback, especially when they see that something is going wrong or is incorrect.

In a recent publication, the AFM calls on pension providers to pay more attention to the importance of correct participant information. The AFM has noted that errors are made in underlying administrative systems or in the connection to communication outputs, meaning participants may receive incorrect information about their pension. When a participant suspects an error regarding their pension, it is important that they can express these concerns. This allows the error to be corrected or gives the pension provider the chance to explain how things stand and why there is no error. Knowing that something has not gone well or is not understood is important for participants and pension providers. A complaint procedure surrounded by safeguards is therefore an important element of the service delivery of pension providers to place the participant interest centrally. At present, there are differences in the way various complaint procedures are designed. This is partly because, for example, the Pension Act does not include a complaint procedure surrounded by safeguards, whereas such a procedure exists for insurers in the Financial Supervision Act.

Concerns about complaint procedures at pension providers have also been shared in politics and by the Pension Ombudsman in recent years. In a response to parliamentary questions on this subject, the Minister of Social Affairs and Employment stated in the House letter of 5 April 2019 that pension providers must place the interest of affected pensioners centrally. This can be done by countering the unnecessary juridification of dispute resolution:

The Minister emphasized the importance of an internal complaint procedure again in a letter of 31 January 2020 to the House of Representatives.

"They [pension providers] can take their responsibility by ensuring that pensioners do not have to go to the Pension Ombudsman or even to court. They do this by reaching a reasonable and fair judgment on a dispute in the phase of internal complaint handling, initially or on appeal."

The Pension Ombudsman conducted research in 2019 into the findability of complaint regulations of pension funds. The Ombudsman concluded that on 25 of the 140 websites of pension funds investigated, nothing could be found about how a complaint could be submitted. On 30 websites, it was easy for a participant to submit a complaint, and the process was clearly explained. The Ombudsman made, among other things, the recommendation that pension funds critically assess the extent to which the complaint procedure is sufficiently low-threshold, and the recommendation to make the route to the Ombudsman more findable. In 2020, the Ombudsman conducted follow-up research. Of the 150 pension funds investigated, 55 had an easily findable complaint regulation. In this research, the Pension Ombudsman states that for many pension providers, it is still difficult for people to have a complaint handled. This is not only because complaint procedures are often difficult to find, but also because complaints are not recognized as complaints.

"I find it, completely in line with the objectives of the motions, important that pension providers remove the causes of errors as much as possible and control the consequences thereof. […] Pension providers who have not yet done this, establish an internal complaint procedure (ICP) that does justice to the interest of the complainant. This means that every ICP starts from what is reasonable and fair towards the individual participant or pensioner. This individual interest must not simply yield to the collective interest.
Pension providers ensure that their ICP is well findable and provide a well-findable reference to the Pension Ombudsman."
"If dissatisfaction is not designated as a complaint, a complainant cannot gain access to the internal complaint procedure. But people who have a question for which they do not receive a comprehensible answer, feel themselves to have a complaint. Despite various contacts made via telephone and email, according to the definition of many pension funds, this is still not a complaint. Thus, these 'complaints' get stuck somewhere, and at least dissatisfaction is not removed. Some of these complainants manage to find our institution [Pension Ombudsman]. We have to tell them that they really must first go through the complaint procedure of their own pension provider. This is, understandably, experienced as bureaucratic and not very customer-friendly. This can be prevented if people can find more information on the website of their own pension provider about the complaint procedure."

2.2 Objectives of the Research

The AFM recognizes the importance of well-findable and accessible complaint procedures, and for this reason, initiated research into complaint handling by pension funds.

With this research into the complaint procedures at pension funds, the AFM analyzes which safeguards pension funds have built into the complaint procedures, and to what extent their participants have access to a complaint procedure. To this end, the AFM maps, among other things:

• the extent to which complaint procedures of pension funds are findable;
• the extent to which barriers are erected for participants to submit their complaint;
• which definitions pension funds use for complaints;
• how (handled) complaints are reported;
• the extent to which there is balanced and clear information about the complaint procedure;
• and the extent to which the collaborative relationship with the pension execution organization (PEO) plays a role in the complaint handling process.

Based on its analysis, the AFM makes recommendations to both the pension sector and the legislator to strengthen the legal position of participants at pension providers.

2.3 Research Methodology

Scope of the Research

The AFM conducted research into the internal complaint procedures of all 164 active pension funds. Pension funds that were in liquidation at the time of the research were not included. The research only looked at complaints from participants at pension funds, and complaints from employers towards the pension fund were explicitly excluded.

Research of Publicly Accessible Information

The AFM mapped the complaint procedures of all pension funds. For this, available public information from pension funds was used, such as the annual reports for 2020, the websites of the pension funds, and any complaint or dispute regulations on the website. The AFM tested this public information on the following aspects:

1. the (manner of) reporting on complaints in the 2020 annual report;
2. the findability of complaint procedures and any complaint regulations;
3. the accessibility of complaint procedures and possible barriers for participants;
4. the definitions used for complaints (and/or disputes); and
5. the understandability of decision-making; who makes a decision on the complaint in the first or second instance; is it clear within which timeframes the complaint procedure must be completed, etc.

The figures included in this report were created based on the outcomes of the research into the public information of pension funds and based on data from the AFM's annual data request for 2020.

Interviews and File Reviews

The AFM held discussions with nine pension funds regarding the design of their complaint procedures. A selection was made based on various characteristics, such as the type of pension fund, the pension execution organization (PEO) that handles the complaint procedures for or on behalf of the pension fund, and the number of complaints reported in the annual report. Additionally, the AFM spoke with two PEOs that serve multiple pension funds, to gain more insight into their perspective on the complaint procedures they provide for their clients and the role they play in this themselves. The information from the interviews provides context to the findings the AFM made based on the public information mentioned above.

From some of the pension funds with which the AFM spoke, and which reported complaints and/or objections, complaint and objection files were assessed. Also, the agreements with the PEOs, for example in a Service Level Agreement (SLA), were requested (if available). The requested information and interviews provided insight into the following aspects:

1. The information provision for participants from the moment they use the complaint procedure;
2. The considerations that play a role in designing complaint procedures and/or the handling of complaints by the pension fund/PEO (often in collaboration); and
3. The steering mechanisms in the SLA agreements and the underlying considerations that form the basis for them.

2.4 Guide to Reading

For the sake of readability, this report always speaks of 'complaints', even though pension funds may call this a dispute/complaint/customer signal/incident/other. When referring to complaints, the AFM means any expression of dissatisfaction from a participant towards the pension provider, regardless of the subject of that dissatisfaction or the manner in which it is expressed. The AFM is thereby anticipating the standardization of the concept of 'complaints', which is currently already seen as standard by some pension funds and generally in the insurance sector.

In this report, the AFM explains in Chapter 3 what its findings from the research are and what recommendations and good practices follow from them. Chapter 4 contains the results of research conducted with the Consumer Association regarding the experiences of participants with (access to) complaint procedures. The appendix contains a call to the legislator.

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Towards Better Legal Protection for Pension Scheme Participants

3 Findings and Recommendations

The findings in this chapter are based on the research into the annual reports for 2020, the data from the annual sector view of the second pillar pension, and the interviews conducted with pension funds. The recommendations can help pension providers to improve their complaint procedures, so that they contribute to better service for their participants.

3.1 A Uniform Definition of 'Complaint' is Missing

What is actually a complaint? The Pension Act does not define this. A definition commonly used in the financial sector, and also by some pension funds, is that of a complaint as "any expression of dissatisfaction." The AFM believes that such a low-threshold definition, where the subject or the manner of submission of the expression is not relevant, is a good starting point for designing the complaint procedure. This AFM research shows that pension funds use a wide variety of definitions. This leads to different ways of reporting and to different ways of interpreting the number of complaints received in the pension sector.

3.1.1 Differences in the Definition of Complaint

The AFM's research shows that there is currently no uniform definition of the concept 'complaint' within the pension sector. The AFM assessed which definitions the various pension funds use according to their website or complaint regulation to determine what constitutes a complaint. This reveals significant differences between pension funds. The definitions vary from "any expression of dissatisfaction" to a more legal approach, such as "any written objection of an interested party against a decision of the pension fund or its pension provider in the context of the execution of the pension regulations." The AFM sees that there are mainly two ways in which pension funds delimit the concept of complaint: a distinction is made based on the subject of the expression of dissatisfaction, and based on the manner in which the expression is submitted.

Figure 1: Representation of the different types of complaint definitions.

In Figure 1, the AFM makes it clear to what extent the definitions of complaint used by pension funds vary. Approximately one-third of the pension funds make no distinction in the definition regarding the subject of the complaint or the manner in which it is submitted (A). Oral expressions of dissatisfaction are also included as complaints, according to the website or pension regulation. An approximately equally large portion maintains a substantive distinction in the definition of complaint (C). At these pension funds, the AFM sees that in most cases, expressions regarding the treatment or handling by the pension fund or the PEO are defined as complaints, while expressions regarding the execution of the pension regulation are often called 'disputes'.

In the research, the AFM notes that the substantive distinction between a complaint and a dispute is indeed relevant for participants. A portion of the pension funds (38%) knows a procedure for complaint handling and a different procedure for dispute handling. For participants, it is therefore important to know whether their pension fund qualifies the expression as a complaint, a dispute, or neither. For this, participants are often dependent on (often legally oriented) complaint and dispute regulations to know what the definitions are, and which steps and timeframes belong to the procedure.

Standardizing the definition of complaint can make complaint procedures easier for participants; they do not have to figure out which procedure needs to be followed. A lack of a uniform definition can also lead to limited visibility for pension fund boards on the participant signals present at the pension fund, because a selection is made of the expressions reported on based on the existing definition. In the discussions, the AFM asked pension fund boards what they would think of standardizing the definition of a complaint. The majority of the boards stated they were in favor of standardizing the complaint definition and saw this as an improvement that benefits the participant. The other boards had no pronounced opinion.

Figure 1 Data:

• 58: A: No distinction in subject or manner of submission of dissatisfaction.
• 24: C: No distinction in manner of submission, but distinction in subject of dissatisfaction (e.g., "any expression that you feel treated unfairly, but your rights are not infringed").
• 59: D: Distinction in manner of submission and subject of dissatisfaction (e.g., "written expression that you feel treated unfairly").
• 4: E: Applied definition does not appear from the source.
• 19: B: (Implied category from context, likely specific legal definitions).

(Note: The original text cuts off at "E: gehanteerde definitie blijkt niet uit". The translation preserves the visible text and structure.)