When the 2007–’09 financial crisis destroyed billions of dollars in global pension assets, no country was immune — not even the Netherlands, whose retirement system ranked No. 1 for 2011 in the annual Melbourne Mercer Global Pension Index. One of the Dutch scheme’s strengths is that during tough economic times it adjusts employer and employee contributions as well as retiree payments. Then there’s the high, 105 percent funding bar that plans must reach before full benefits are paid out. The same goes for any cost-of-­living adjustment.

By early 2012 it looked like many Dutch pension funds would have to cut benefits over the next year because they were still below 100 percent as a result of the crisis. At Amsterdam-­based APG Asset Management, the Netherlands’ largest pension manager, with €300 billion ($413 billion) in assets, business strategist Eric Veldpaus hatched a partial solution. Veldpaus observed that with the discount rate — the number used to project pension funds’ payouts — at just 2.5 percent, there was only one choice left to protect retirees’ benefits: scrape basis points off the floor through cost savings.

So Veldpaus, 49, targeted hidden expenses by devising cost-­reporting standards for APG and other Dutch pension funds. In late 2011 and early 2012, he spoke about the proposed model with representatives of De ­Nederlandsche Bank, the Netherlands Authority for the Financial Markets and national auditing and asset management professional associations. He quickly got buy-in from everyone. In November, ­Veldpaus talked with Institutional ­Investor Senior Writer Frances ­Denmark about the need for pension cost transparency.

1. Where did the idea of creating cost disclosure standards originate?

An April 2011 report by the Netherlands Authority for the Financial Markets found that pension funds do not reveal all of their costs. The Dutch pension federation, an umbrella organization representing most pension plans in the Netherlands, sought a way for its constituents to regulate their own cost discipline. That, coupled with the threat of reduced pension payments, led me to think, ‘Maybe we can achieve a few extra percentage points in cost savings.’

2. How did you start your initiative?

I got involved in the project via APG. Initially, I was a co-­author of recommendations on administrative costs and author of a further elaboration on asset management costs. I wrote two treatises on pension cost management that were published by the Dutch pension federation in 2011 and 2012. By publishing the booklets the federation avoided formal legislation, proving the industry could self-­regulate, and the Dutch central bank, our pension supervisor, adopted the cost definitions. Now countries like Italy, Belgium, Australia and Sweden are very interested and asking me questions about these standards. Our mutual fund and insurance industries may be next.