Initial insights on the AFM’s choice guidance research

This year, the AFM initiated a study on choice guidance. In the first quarter of 2025, the AFM expects to publish a report with recommendations and good practices. Follow-up research has already been announced. The AFM has shared the initial insights with the sector through its newsletter.

Don’t lose sight of choice guidance

The new legal standard for choice guidance, which has been in effect for over a year now, has been a key focus alongside communication in the AFM’s publications for some time. The ongoing transition in the pension sector demands maximum attention. Nonetheless, it is advisable to begin setting up choice guidance in a timely manner. The law obligates pension funds, insurers, and premium pension institutions to adequately design a choice environment that enables participants to make suitable choices within the pension agreement.

AFM points of attention

Based on initial insights from the exploratory study, the AFM highlights four key points of attention:

1. Develop a clear and substantiated understanding of participants and the differences between participant groups.
2. Not all participant groups are sufficiently accounted for.
3. Document why you have designed your choice guidance in a particular way.
4. Already incorporate the consequences of the transition into choice guidance for participants.

More than communication

This interim feedback emphasizes that documenting and substantiating choices requires greater attention. It is crucial to link these choices to the characteristics of the participant population (or subgroups). In our consulting practice, we observe that this aspect often lacks sufficient focus. Additionally, choice guidance is frequently viewed as a part of participant communication. While this is partially correct, choice guidance extends beyond simply informing participants. Its purpose is to support participants in making appropriate decisions. Choice guidance is therefore about not only the “what” but also the “how.”

Our advice on choice guidance

We recommend the following steps for choice guidance:

1. Describe the characteristics of your participant population (this is also part of the communication plan). Consider former partners, former participants, and participants with limited digital skills.
2. Outline the general principles for choice guidance. These principles should align with the characteristics of the participant population. What are the conditions for choice guidance, and why are they important for specific participant groups?
3. Pay special attention to participants with limited digital skills. What (additional) measures are being taken to help these participants make appropriate choices?
4. Detail the choices, the default option, and the rationale behind using this default option.
5. Incorporate relevant consequences of the transition into choice guidance for participants. This can be particularly relevant for decisions like individual value transfers.

Questions

If you have questions about choice guidance or would like your choice guidance policy reviewed by experts with experience in duty of care and regulatory oversight, please feel free to contact us. We are happy to assist you.