DENMARK - The controversial decision by a major Danish labour market pension fund to shed yield guarantees for members is bound to be followed by others in the run-up to the Solvency II compliance deadline, the managing director of leading commercial provider Skandia predicts.
Charsten Christensen told IPE: "I'm quite sure Sampension will be followed by other pension funds looking for an approval from the FSA to withdraw their guarantees."
However, labour market fund Sampension pointed out that because it is ultimately customer-owned, its withdrawal of guarantees did not in fact spell lower returns for its members.
In May, Sampension agreed with partners in the collective labour agreements that underpin its pensions that it would abolish the yield guarantees enjoyed by members.
The Danish Financial Services Authority (Finanstilsynet) provisionally approved the move in October, although this is subject to approval by the Financial Business Council on 28 November.
The move by Sampension - which manages DKK111bn (€14.9bn) in assets - has attracted some negative reactions from both pension providers and consumers in the Danish media, with commentators claiming scheme members will be poorer as a result.
Christensen said scrapping guarantees was unfair for Sampension's customers.
"Three hundred thousand Danes have trusted Sampension with their pension savings, and they have paid for their guarantees for decades in good faith," he said. "Now, suddenly, the guarantees have been withdrawn, just like that.
"Even though the contractual details in the collective pensions schemes are not the same as in the commercial schemes, the customers are left with the feeling that the general protection of consumer rights does not apply for them."
Sampension argued the shift it has negotiated with trade unions and employers - from the current "formal guarantees" to a "statement of intended pension payments" - did not mean members were any more likely to receive lower payments.
Henrik Olejasz Larsen, CIO at Sampension, said: "The capital behind the pension benefits, as well as the conservative investment policy, are not changed by this, but it will allow Sampension to avoid the stricter capital requirements.
"As Sampension is essentially non-profit, the likelihood of reduced pensions is not increased by this - as the guarantees in any case only are backed by current reserves and not by any sponsors.
"On the contrary, if new subordinated loan capital should be raised at high costs this would be at the expense of our members. The Danish FSA is currently looking at the decisions and on our communication of this to members."