DENMARK - Two of Denmark's largest pension funds are merging to form a DKK77bn (€10.4bn) customer-owned fund, as AP Pension and FSP join forces under the AP Pension name.
FSP, the DKK22bn labour-market fund for the financial sector, cited increased competition, regulation and capital requirements as reasons for its decision to link up with the larger fund.
Holger Damgaard, chairman of the trustee board at AP Pension, said: "Together, we will have 110,000 customers and 77bn kroner under management. This will give us a new strength in the market and result in noticeable economies of scale."
FSP's managing director Steen Jørgensen said: "FSP is a competitive pension fund, but in the current situation, where we are facing greater competition, rising regulation and increased capital requirement, it is our recommendation to customers that a merger with AP Pension is the best possible way of safeguarding their interests."
The three directors of the new fund will be Jørgensen together with AP Pension's Søren Dal Thomsen and Bo Rasmussen.
Jørgensen said FSP had considered other possible partners in the pensions sector, but that AP Pension was the best match.
"AP Pension is built on the same democratic values as FSP, and AP Pension is at the same time the company that has created the greatest value for its customers over the years," he said.
He insisted it would have been possible for the smaller fund to continue alone.
"FSP is well equipped to manage on its own in the future," he said.
But the pension fund has been criticised for having some of the highest costs in the industry.
In a cost comparison, the two pension funds showed FSP charges members DKK2,822 a year - more than twice the DKK1,355 levied by AP Pension.
The new joint pension fund will have costs of between DKK1,350 and DKK1,500 per customer, the funds said.
But this is set to fall over the next few years, AP Pension said, with its customers seeing their costs reduced by as much as 10%.
Both pension funds will contribute capital to the new company, and the merger is expected to happen during 2012.
The joint administration company Forca will continue to administer pensions for FSP Pension customers for the time being.
The merger will have to be approved at FSP Pension's AGM on 19 April and is subject to regulatory approval.
The new merged pension fund will be housed in AP Pension's existing offices in the Østerbro district of Copenhagen.
Staff will total 245, including AP Pension's current 220 employees and FSP's 25.