The Danish financial regulator Finanstilsnet has criticised pension fund Bankpension, insisting it must be more explicit about its investment stance and prioritise treating scheme members in a fairer way.
In a report following a regular inspection, Finanstilsynet said: “The management board needs to be more explicit about its stance on investment, and in some respects, needs to have greater focus on a more equitable treatment of policyholders.”
In one of its criticisms, it ordered Bankpension to return to individual accounts some of the customer savings it had added to the collective bonus pool.
The savings in question related to pension products with conditional guarantees that applied only to part of the contributions.
In its report, the regulator said: “In the FSA’s opinion it is not possible to agree on a division of pension between a guaranteed portion and a collective portion without hedging the guaranteed portion in full.”
It said the fund must change the technical basis of this operation and return the pension contributions that had historically been transferred to the collective bonus potential.
Bankpension responded by saying it was returning the amount charged to members’ deposits, and that this principle would be taken into account for subsequent distributions.
The regulator also issued Bankpension with a warning, as it was concerned that its very high number of external investment managers required a significant level of scrutiny.
The high number meant in an increased risk of lacking oversight and inadequate risk management being in place, it said.
It its response, Bankpension said its board had already decided — independently of the inspection — that the number of portfolio managers had to be cut for administrative reasons.
“This process has been initiated,” it said.
Regarding investment, Finanstilsynet issued an order for Bankpension to set investment frameworks and limits for interest rate risks for each individual risk profile.
It ordered the pension fund to set guidelines that ensured there was no disproportionate reliance on a particular type of asset, investment market or a particular investment.
While Bankpension responded by saying it would deal with this at its next board meeting, it also countered the criticism, saying that more detailed frameworks would not lead to the board receiving reports of risks it had not been aware of or monitored previously.
This was because the reporting undertaken already contained more information than was laid down in the frameworks, it said.