DENMARK - Two of Denmark's smaller pension funds are considering merging with the much larger Industriens Pension, in a deal which could boost Industrien's assets by 13%.
PNN Pension, which covers workers in the meat industry, and PHI pension, whose members come from the bakery, dairy, chocolate and sweets and tobacco industries, have announced they are conducing a preliminary analysis of the proposed merger.
PNN Pension has 35,000 members and PHI has 21,000 members, against Industriens Pension's membership of 352,000.
"New legislative demands and the growing complexity of pension schemes means that we want to be part of a large community, so we will be able to keep costs low and returns high in the future too," said Ole Wehlast, chairman of both pension schemes and head of the NNF trade union.
The two schemes currently outsource administration to AP Pension but Wehlast suggests a merger with Industriens may be more beneficial to members.
"For 16 years, we have had a very good cooperation with AP Pension. However, the board believes it is time to investigate the possibility of linking the pension funds with another labour market pension scheme. It looks as if we can fulfil our goals by managing the pension schemes with Industriens Pension from now on," he said.
Industriens Pension's assets under management would be boosted by around 13% if the merger goes ahead as at the end of 2007, PNN Pension managed total assets of DKK4.71bn (€630m) and PHI had DKK1.82bn under management, while Industriens Pension had DKK48.46bn.
At the annual general meeting of the two smaller pension schemes, it was agreed management should work towards a merger to take effect on January 1, 2010 but a final decision is expected this autumn, Industriens Pension said in a statement.
Jens Baltzer, managing director of PNN Pension and PHI, told IPE he had been talking to AP Pension, Sampension and Pension Danmark regarding some form of cooperation, before deciding to focus solely a possible merger with Industriens Pension.
Erik Adolphsen, managing director of Industriens Pension, welcomed the decision. "Of course, we hope that the process will end with us being able to welcome 56,000 new members and their 1,200 employers," he said.
"The admission of new members and businesses will, in the long-term, increase the economies of scale and therefore work towards keeping costs down for the benefit of current and new members.
"At the same time, the successful implementation of our new modern IT platform makes it relatively simple and cheap to take new groups of members in," said Adolphsen.
Commentators in Denmark are expecting a wave of mergers in the pensions industry as smaller schemes seek to lower their costs.
At the beginning of this week, the Danish Competition Commission said administration costs varied widely between pension schemes in Denmark.
Many small labour-market pension institutions are not large enough to take advantage of the potential economies of scale to be had, it said, adding customers of institutions with high administration costs would probably only be able to have these reduced if the schemes outsourced or merged.