To make the subject more transparent and to serve the social significance, pension will become a permanent theme on Follow The Money, the platform for investigative journalism. Editor-in-chief Eric Smit: “Pension is everyone’s business. But at the same time, it is such a complicated matter, it requires expertise we are lacking in Dutch journalism. We are now training such expert.”
The fact that it will take a couple of months before pension gets a permanent spot on Follow The Money, certainly doesn’t mean that editor-in-chief and founder Eric Smit is unfamiliar with the topic. As soon as the subject comes up, he talks non-stop about asset management, fully funded pillars, how the contribution-based system is historically arranged in the Netherlands and about pension capital invested abroad. “I am not a pension specialist and am therefore looking at this topic from a distance. Slightly critical, but mainly curious”, he interrupts his enumeration.
As an example of matters he would like to understand better, Smit mentions the yield spread throughout the years - investing in the Netherlands versus investing abroad - and the diversification strategy. Or, as he moves on to yet another topic, the way in which pension funds are acting with regard to the commercially operating insurers. “I find that intriguing. Insurers have a profit motive and use all kinds of pension products to ensure that the insured persons are able to enjoy a certain pension. That has changed quite a bit in the past few years. From a pension promise with overall assurance, we, as a society, have shifted towards a system where the risk has been devolved to the citizens. Both pension funds and insurers go along with this devolvement. That’s a drastic development.”
Actuarial interest is interesting but complicated
The current events involving coverage ratios and actuarial interest are also occupying Smit’s mind. “The Netherlands has quite a unique funded pension system and the concept of actuarial interest is very interesting to me. Mainly because it’s partly a rational consideration and partly almost a political assessment.” As interesting as he believes the topic is, it is very complicated at the same time, according to Smit. And that’s exactly the reason why the editor-in-chief is placing this theme on the agenda of FTM.
He continues: “Pension funds are richer than ever before and yet the agreements are not being honored. In other words: people think their pension would grow along with them, would be indexed, but that hasn’t been the case anymore for many years. The premiums are even increased. How is that possible? That is very difficult to digest for many people and not easy to explain. But we want people to understand.”
Responsibility for investment decisions
Where the actuarial interest is not the responsibility of pension funds, as it is imposed by the government, Smit says the funds can be held accountable for the investment decisions they make. “Think about the tobacco industry. Only after 22 years (!) of massive compensations paid by American tobacco firms, the funds here decided to no longer invest in tobacco. That was actually not before the beginning of last year. It is bizarre to see with how little perseverance the governments and pension funds are acting.”
A pension fund must really consider what they’re investing in, says Smit. And pay attention to matters such as (social) sustainability and the business model of companies. “Journalists look at those things critically. And also at the efficiency of the investments. What are the corresponding costs? Is the choice made for private equity and, if so, which one(s)? What does it yield, can it be done more efficiently, and can the investments made be more passive, so the investments don’t result in the outrageous wealth the management teams of these private equity firms are gaining now? I am not suggesting this area is all black & white, but it is complicated and important. It involves a lot of money, belonging to many Dutch people. And that’s why we will start devoting really close attention to the subject.”
Lack of substantive knowledge within the journalistic branch
Follow The Money has always paid attention to pension, but really taking a deep dive into the topic requires a journalist who fully gets to grips with its complexity, Smit explains. “You need someone who knows all the ins and outs. From asset management and supervision of conduct to investment strategy and legislation.” And even then, it’s not easy to communicate about pensions. “Even the people within the pension industry itself are hardly able to re-interpret all the facts for the public.”
But, according to Smit, it’s not just FTM neglecting pensions. Dutch journalism as a whole is not paying enough attention to the theme, according to the editor-in-chief. “The financial knowledge in journalism is rather sparse. Pension is the most difficult file there is. All the more reason for us to be reluctant starting the theme: the ideal polymath in journalism who has this knowledge, has not yet been found. But... We are training this person now and his name is Thomas Bollen. He has matured for a couple of years and is almost ready to dive into the difficulties related to pensions. We will start writing good explanatory articles to eliminate the comprehension gap between the pension industry and the public. We can then look critically at the content, such as the pension system.”
Look inside the world of pensions
The fact that FTM will be assisted by APG - Gerard van Olphen has offered for the investigative journalist to visit and see how APG, and with that, the pension industry works, pleases Smit a great deal. “APG has a tremendous amount of in-house knowledge, so we will definitely accept that invitation. By participating in background conversations, we gain more understanding on the importance of our topic, assess our own insight and write better articles. That doesn’t mean we will become less critical.”
In addition to attention for pensions, Smit believes investigative journalism in general is important. “We are chasing politicians, find out where the community funds end up. We take a closer look at matters that concern everyone. Such as the price of an airline ticket. How expensive is it really when including the subsidies, infrastructure and kerosene? It is our duty to investigate certain matters.”