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Danish insurer-led pensions are cheaper - F&P

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DENMARK - The running costs of Denmark's mandatory labour market pension schemes have fallen by around 12% since 2002, but company schemes remain far more expensive and have hardly reduced costs at all, according to new industry figures.

The latest data from the Danish Insurance Association (F&P) claimed that since 2002 annual pension costs have shrunk on average from DKK630 (€84.62] to DKK550 (€73.83) for the labour-market schemes, making them 12% cheaper over a period when, F&P points out, consumer prices have risen by at least 12%.

"Pension companies have to keep assessing whether their administration is competitive," said Carsten Andersen, deputy director of F&P. "The falling level of outlay on administration shows that the pension companies do compete to a high degree on prices and continue to work to stay as effective as possible for the benefit of consumers."

The association noted many pension funds of this type in Denmark have outsourced and established joint administration companies in a bid to lower their costs. It said the fall in costs was evenly spread between small and large companies, so the reduction was not only benefiting members of big providers.

Company pension schemes, on the other hand, have not reduced their costs over the same period, according to F&P, explaining that these schemes have had the expense of developing new unit-link pension plans. But in the last two years costs had slimmed slightly to an annual average of DKK1,290 in 2008 from DKK1,340 in 2006.

"Those pension schemes for employees in a single company typically have individual [investment] options to choose from and more individual advice than schemes which form part of collective labour agreements," said Andersen. "That is why prices are different too."

F&P cited an OECD survey which named pension schemes in Denmark and Holland as the cheapest in the OECD area. On average, annual pension costs in Denmark were slightly over 0.2% compared with the average of 0.8%, it said.
Separately, PKA, which runs eight occupations pension funds in Denmark with combined assets of around DKK114bn, said it has almost halved its costs since 2002.

Annual costs had fallen from between DKK724 and DKK741 in 2002 to between DKK371 and DKK404 in 2008, representing a fall of between 45% and 49%, depending on the pension fund.

The lowering of costs was mainly thanks to an effectively organised administration and the economies of scale gained through the creation of the joint administration company Forca, it said.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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