DENMARK - Danish labour-market pensions organisation PKA has stated publicly that it is on track to meet upcoming requirement under Solvency II and that guarantees on pensions arrangements will continue.

PKA was responding to speculation in the Danish media about pension funds being forced to withdraw guarantees when the EU solvency legislation is passed into Danish law in 2013.

Sampension - one of Denmark's largest labour-market pension groups, with DKK111bn (€14.9bn) in assets - announced in May that it would scrap guarantees in light of the upcoming rules on reserves.

PKA said: "Recently there has been a certain amount written in the media that a range of Danish pension firms will find it difficult to meet the coming EU demands for capital, and that they might therefore abandon the guarantees underpinning pensions.

"PKA has worked for many years to ensure the PKA pension funds are able to meet the new demands from the EU (Solvency II), and the (funds) are well equipped for the new demands."

It said it therefore had no plans to change guarantees.

Morten Lund Madsen, head of risk management at PKA, conceded the organisation was yet not Solvency II compliant - due to uncertainties surrounding upcoming level 2 and level 3 regulation - but he said the group was confident it would meet the requirements.

"As an example," he told IPE, "PKA has just completed the fifth QIS, and even though there are still uncertainties in the interpretation of the standard formula, the results have caused no worry whatsoever."  

Acknowledging that Sampension had said it would drop pensions guarantees, Lund Madsen said other pension funds could follow.

"Others may consider the same solution, but we have no indication of how many, or in what way they will do so," he said.

The guarantees in question are on traditional with-profits pension plans. Many Danish pension funds have actively marketed unit-link pension plans in the last few years that do not have guarantees.

PKA only provides traditional with-profits guaranteed pensions, but Lund Madsen said many members with high guarantees had chosen a 0% guarantee at the end of 2008 in return for a 10% higher total pension.

In a draft ruling, the Danish Financial Services Authority last week said Sampension's abolition of guarantees did not contravene regulations, noting that the move had been made with the agreement of the collective bargaining partners.

It went further, stating that the withdrawal of guarantees was not necessarily negative for customers, but could be in their interests.

Reporting interim results earlier this week, Danica Pension, Denmark's largest commercial pensions provider, opted to state explicitly that it already had enough capital to comply with the new solvency rules.

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