The Architects’ Pension Fund (Arkitekternes Pensionskasse, AP) in Denmark has moved a step closer providing its members with market-rate rather than average-rate pensions after a vote at its annual general meeting (AGM) – despite remaining locked in a long-running dispute with the Danish FSA over the issue.
At Wednesday’s AGM – held digitally because of social distancing measures imposed due to the coronavirus outbreak – 93% of the vote by AP’s members came out in favour of a board proposal for all new scheme members to be signed up to a new market-rate pension, the fund said in a report on the meeting.
Under the resolution, the independent fund – which had total assets of DKK10.5bn (€1.4bn) at the end of last year and is run by Sampension – is to put new members into Sampension’s existing lifecycle market-rate product.
AP said on Friday in the report that its work on transitioning to a new market-rate product had been going on for a long time, with its board of directors having wanted to offer members a collective conversion to the new product last year.
“However, this was rejected by the Danish FSA (Finanstilsynet), but the board of directors does not agree with the decision and has referred it to the commercial appeals board of the Ministry of Industry, Business and Financial Affairs,” the fund said, adding that the board’s chair Cecilie Therese Hansen said in her report that she expected an official response to the dispute soon.
In April 2019, AP and another independent pension fund under Sampension’s umbrella – the Pension Fund for Agricultural Academics and Veterinary Surgeons (Pensionskassen for Jordbrugsakademikere & Dyrlæger, PJD) – appealed against the FSA’s ban on their plan to switch all customers to market-rate pensions without getting individual consent.
The regulator had ruled the funds could not switch all pensions to a market-rate basis from a conditionally-guaranteed average-rate set-up, as they had intended, based solely on a collective vote at their AGMs.
In light of the lengthy appeal process, AP said on Friday, the board of directors had chosen to submit proposals that all new subscriptions be made at market rates “to ensure a solution for new members that is more in line with their age and life situation”.
Meanwhile, PJD is due to hold its AGM on 22 June, and has a similar proposal on the table.
Over the last few years, many Danish pension funds have acted to move their provision to market-rate pensions rather than traditional average-rate products with or without yield guarantees, mainly because of the additional complexity and regulatory cost of the older-style schemes.
In PJD’s case, the fund’s chair Erik Bisgaard Madsen has argued that the current average-rate scheme is a challenge because all members have the same risk profile. This could mean that in a financial crisis, pension payments may have to be reduced by almost 20%, he said back in March.