Denmark’s biggest commercial pension provider PFA is taking over labour-market pension fund Bankpension, as consolidation in the country’s pensions sector tightens.

Financial sector fund Bankpension and PFA said they agreed a framework for a merger, with PFA as the surviving company.

The common aim of the merger is to achieve positive synergies for the benefit of customers in both businesses, the organisations said.

Niels Erik Jakobsen, chair of Bankpension’s supervisory board, said: “The supervisory and management boards of Bankpension believe a merger with PFA holds greater long-term benefits for Bankpension members than if Bankpension continues as an independent institution.”

The merger will see Bankpension’s DKK21bn (€2.8bn) in assets under management added to PFA’s DKK552bn.

Bankpension, founded in 1912, has DKK800m in annual contributions, 50 member companies and 17,000 individual members.

PFA and Bankpension have held in-depth talks over the last few months on how the two could continue as a common pension company under the direction of PFA.

Discussions had been based on, among other things, a due-diligence process that had shown the strength of the two companies, they said.

Allan Polack, PFA’s group chief executive, who came to PFA earlier this year, said: “We look forward to uniting the strengths between the two pension companies, which are both built on strong relationships and their connection with members and customers.”

Although PFA is a commercial enterprise, it is customer-owned.

The two parties said they would aim to carry out the merger in 2016.

Bankpension was recently criticised by the financial regulator Finanstilsynet on several counts following a regular inspection, being told in particular that it had to be more explicit about its investment stance and sharpen its focus on a fairer treatment of policyholders.

Pension funds and providers in Denmark have been joining forces in various ways over the last few years, as pressure from increasing regulation coupled with low interest rates, as well as the competitive need to keep costs down, have made it harder for smaller funds to survive.

The big commercial providers, Danica Pension and PFA Pension, have been particularly active in seeking to take over independent labour-market pension funds.

In September 2014, Bankpension’s longstanding chief executive Niels-Ole Ravn left suddenly, with Jakobsen commenting that the pension fund’s future would contain challenges of “a different character.”

Last year, however, three labour-market pension funds – doctors’ fund Lægernes Pension, engineers’ fund DIP and lawyers and economists’ pension fund JØP – publicly rejected suggestions they should merge with a large provider. 

They said pensions were too important to become the object of a competition providers’ expansion ambitions and argued that it would be a very bad business move for their customers if they allowed themselves to be taken over.