DENMARK – Danish engineers’ pension fund ISP Pension is outsourcing all activities to commercial mutual provider AP Pension in a bid to gain economies of scale while retaining independence.
ISP Pension, the pension fund for technical and diploma-qualified engineers, described the deal as one of the most comprehensive outsourcing agreements between two pension funds in Denmark to date.
Lars Bytoft, chairman of ISP Pension’s trustee board, said: “We carried out a thorough analysis to determine what is going to be best for our members in the future.”
The board decided unanimously that the pact with AP Pension offered the best of all worlds, he said.
Under the terms of the outsourcing agreement, which will take effect on 1 July, AP Pension will take over all activities ISP Pension carries out for members, including administration and investment.
But ISP will still operate as an independent pension fund holding annual general meetings, and having its own director and trustee board chosen by members, the fund said.
“We will retain our complete independence and so keep the advantages that go with being a very homogenous group,” Bytoft said.
“At the same time, we will benefit from the economies of scale and the robustness that comes with being part of a larger company in the form of, for example, lower administrative and investment costs.”
Bytoft also cited AP Pension’s commercial focus as a point in favour of the agreement.
He said it was also very important for ISP Pension to have found a strong partner in AP Pension, as this would help attract new members, particularly among private-sector engineers.
He said there was also a clear alignment of values and interests between the two organisations, referring to the fact ISP Pension was a membership organisation, and AP Pension owned by its customers.
Both were completely independent of external capital interests, Bytoft added.
AP Pension’s managing director Søren Dal Thomsen said his company and ISP Pension had developed a new outsourcing partnership model together.
“I am sure this model solves many of the challenges more pension funds will face over the next few years in a market that is heavily regulated and very competitive,” he said.
ISP has 11,500 members and assets under management of DKK15bn (€2bn), compared with AP Pension’s 118,000 customers and DKK87bn in AUM.
ISP receives annual contributions of around DKK400m compared with AP Pension’s DKK7.2bn.