DENMARK - Danica Pension has imposed a withdrawal penalty on some with-profits pensions and cut account dividends, blaming the equities slump and lower interest rates for the move.
Jørgen Klejnstrup, managing director of the Danish commercial pensions provider, said:
"The debt crisis has led to very large falls on the stock markets and at the same time lower interest rates. Therefore, we are now introducing a temporary withdrawal penalty, which applies to customers with low guarantees in Danica Traditionel.
"In addition, the account dividend is being reduced to 2.25% for the same customers, effective from October."
The Danske Bank subsidiary is now the second Danish pension provider to react to the rout in equities markets this summer by bringing in a withdrawal penalty.
Such moves are aimed at deterring scheme members from transferring out of the scheme at a time when the stated value of assets is likely to be less than their market value. Danica's action echoes a similar decision taken by Skandia in mid-August.
Of the four yield groups within the with-profits Danica Traditionel product, two have been hit with the withdrawal penalty and account dividend cut.
Yield Group 1, for new customers, now has a penalty of 1.2%, and its pre-tax account dividend is being lowered to 2.25% from 3.25%.
Yield Group 2 (low guarantee) has a 2.4% penalty and the same reduction in dividend as Group 1.
Yield Groups 3 and 4 have no withdrawal penalty, and the account dividend for each remains at 3.25%.
While the dividend cuts apply from October, the withdrawal penalties take effect straightaway.
In other news, Denmark's Lærernes Pension has told scheme members it has no intention of following the market trend by switching its with-profits scheme to unit-link.
The DKK40bn (€5.4bn) labour-market scheme for teachers said: "More and more companies offering labour-market pensions are choosing to move their members from with-profits to unit-link. We have no plans to do this."
Whenever the scheme is changed, it is done in discussion with the members, who are represented by the organisation's two member forums, Lærernes Pension said.
The last time the scheme was altered was in 2008, when both forums wanted to maintain the with-profits investment method, the fund said.
Managing director Paul Brüniche-Olsen said: "We are not against unit-linked products in any way. With-profits and unit-link are two different products, and it completely depends on how great the need for safety is."
At the end of last month, Denmark's DKK90bn Industriens Pension announced it was switching its entire with-profits based pension scheme to a unit-linked basis.
Lastly, in interim results, Pædagogernes Pensionskasse (PBU) reported stronger profit and solvency levels in the first half of this year in a period marked by a large-scale shift into unit-linked investment.
PBU, the Danish labour-market pension fund for education practitioners, said profit for the six months to the end of June rose to DKK107m, up from a loss of DKK43m in the same period a year earlier.
Investment profit for distribution to members in the unit-link scheme rose to DKK731m from DKK391m.
At the end of June, PBU's solvency had risen to 51.9%, up 37.1 percentage points from its position at the end of 2010.
In its interim report, it said: "Apart from the positive result for the first half of 2011, the reason for this rise is that the solvency burden has become significantly smaller since the move to unit-link on 1 June."
On 1 June, the whole pension scheme moved to a unit-link basis following a decision by the board, although pensioners remain in the with-profits product, PBU said.
Since the fund first set up its unit-linked pension product in 2003, an increasing number of scheme members had opted to switch their savings into it, and away from the with-profits scheme, it said.
PBU added: "This is a significant milestone for PBU, and provides the basis for continuing to work to improve the pension scheme for education practitioners."
"At the end of 2012, new solvency rules - Solvency II - will be introduced for pension funds, which, in conjunction with the new contribution rules, mean that even well-consolidated pension schemes such as PBU will no longer be able to offer a broad and varied investment policy for pension schemes on a with-profits basis."