Denmark’s ATP has cancelled a huge IT contract between the public payments operation it runs and software supplier KMD, and is seeking more than DKK500m (€67.2m) in compensation.
The pension fund said the board of Udbetaling Denmark (Payments Denmark) had decided to halt the deal for a new system to pay pensions and early retirement benefits to 1.3m people, because delivery was already at least 15 months late and KMD could not guarantee there would be no more delays.
Udbetaling Danmark is a public authority responsible for collecting, paying, and controlling a number of public benefits, and is administered by the ATP Group.
ATP also said KMD was not suppling Udbetaling Danmark with the standard pension system agreed in the contract.
Frank Jensen, the mayor of Copenhagen and chairman of Udbetaling Danmark, said: “We are now initiating arbitration and our demand will be for an amount in the high three-digit millions, which is the loss that local authorities and thus taxpayers ultimately may have to pay.”
KMD’s legal director and lawyer Mark Skriver Nielsen said the firm was surprised by ATP’s action, but now expected to have the matter settled in court, which he said was sad for all parties including the municipalities.
“We had hoped to find a common solution, but we are ready to accept arbitration,” he said.He defended KMD against some of ATP’s claims.
Meanwhile, Danish labour market fund Industriens Pension reported a rise in investment returns last year, producing 8.2% overall after a 6.7% gain in 2015.
High-yield bonds and infrastructure were the strongest-yielding asset classes during the year, Industriens said.
High-yield corporate bonds generated a 14.8% return, outperforming the benchmark by 1.8 percentage points, while infrastructure made an 11.4% return, according the pension fund’s annual report.
Foreign equities underperformed the benchmark by 1.5 percentage points, giving a 7.7% return. Danish equities generated 3.2%, which was in line with the comparison index.
Solvency levels fell to 342% at the end of 2016 from after the transition last year to new Solvency II-based rules, from 479% for 2015 when calculated according to the new rules.
The pension fund put the solvency fall down to an increase in capital demands and the fact that less of its so-called tax assets could now be included in the recognised capital base.
Industriens Pension’s total assets grew to DKK157m at the end of December, from DKK149bn the year before.