Conductor function: the linchpin in the calculation of the personal pension pot

The Future of Pensions Act (Wtp) requires APG to modify its services. The introduction of the conductor function is an example of this. APG uses this to create the necessary link between the pension administration and asset management parties. This allows APG to translate the collective investment returns into personal pension assets and into collective assets of and for the participants of the affiliated funds.

The new conductor function changes the route that the incoming pension contributions take. “By using connectors, the so-called Capital Transfer modules, there is a direct line between pension administration and asset management,” APG business manager Wouter Köbben explains. This allows APG to convert the personal and collective capital, the inflow and outflow of contributions and benefits, and the cash flows of future benefits per cohort into the information needed by the asset manager. The asset manager – which can be either APG Asset Management or an external asset manager – then invests that capital collectively.

The returns on these collective investments are allocated monthly to the various collective fund assets and to the personal pension capital of each participant according to the rules of distribution. “So there are two information flows: the information the asset manager needs to manage the collective portfolio and the information the pension manager needs to administer the personal and collective assets,” says Köbben.

Coordinating, directing and implementing
He joined APG three years ago and has developed the conductor function – which is embedded in the Pension Administration department – from the ground up. “The purpose of this function is to coordinate, direct and implement the information needs and flow between asset management and pension management. The Wtp, in which participants have personal pension pots, requires a specific information exchange and more cooperation between asset and pension management,” Köbben explains.

Two funds (for whom APG works) have now switched to the new system. He emphasizes that the new system requires different information than the current system. Köbben: “At our Client Contact Center, for example, colleagues receive questions from participants about their personal assets. ‘Why is my neighbor's personal pension pot going up and mine isn't?’ We then provide the correct information and explanation through the conductor function.”

More than just technical data exchange
This means that the conductor function does more than just the “technical” exchange of data. The service also focuses on obtaining information about investments. APG can then use this knowledge to provide detailed information to the funds, participants and employers. The conductor function also manages data flows for reports. They are also the point of contact for asset management parties. They are also responsible for conducting periodic audits and checking the completeness, timeliness and accuracy of the information (exchange).

The conductor function is, according to Köbben, a “completely new and comprehensive phenomenon in the market. We put the premium in, it is invested and returns roll in. We also have to deal with the buffers: the solidarity reserve, the operational costs reserve, you name it. But the financial accounting for everything that goes in as premium and comes out as return must be correct for each participant. And if it is not correct, we must be able to explain where the problem lies.” Because this service must be available for all eight funds that APG works for, the conductor function has been assigned to an operational line department in Pension Administration. “This department is the linchpin that connects all the links, keeps track of internal communication, ensures the chain is functional, and makes sure the calculation of each personal pension pot is correct.”