Danish labour-market pension provider PKA has been reprimanded by the country’s financial watchdog for failing to adequately explain refusals to transfer dormant pension savings to a new provider, while PKA defended the principle of limiting transfers to similar schemes.

The Danish Financial Supervisory Authority (Finanstilsynet, FSA) said today: “The Danish FSA has investigated the conditions which four pension funds under PKA use to tie their customers.

“Several customers have complained that the company refused to transfer their dormant pension savings to a new scheme at another company, which was clearly not a compulsory labour market pension,” the Copenhagen-based authority said.

The watchdog said it had previously stated – via an official order given to PensionDanmark in 2021 and a report in 2022 – that conditions limiting customers’ options for switching such pensions to other providers were in breach of the rules on good practice.

“The FSA is now emphasising once more that a customer must have an individual and factual justification for such terms if the pension funds are to live up to the requirement of honest and loyal behaviour towards customers,” it said.

Pension funds had to open the exit door for customers no longer paying into an occupational pension who wanted to gather their schemes in one place, the authority said.

Ulla Brøns Petersen, director at the FSA, said:  “Imagine a physiotherapist who wants to open their own clinic, and who is self-employed and cannot get their labour-market pension transferred to their new pension scheme, because it is not, by its very nature, a collective scheme.”

“It can mean, for example, the newly self-employed physiotherapist having to wave goodbye to their option to retire earlier,” she said.

The FSA said that if a pension fund set conditions around moving a scheme, it had to have factual individual reasons, i.e. reasons that were in the customer’s interest.

“With these orders, we have hammered home the same, simple point for the third time and had lots of dialogue with the industry about this,” she said.

“Now, I hope that the point will stick in the minds of the pension companies,” Brøns Petersen said.

Responding to the FSA statement, PKA defended the principle that pension savings could only be transferred to other pension schemes ensuring collectively-agreed conditions, but said it had to work on giving better explanations to customers when declining a transfer request.

Tomas Frydenberg, director for members at PKA, said: “The money paid into PKA via the collective agreements must provide a sufficient and stable support basis when the members retire or if they become ill.”

“So pension savings at PKA can only be moved to schemes that ensure just that, because anything else would go against what the social partners have decided,” he said.

Frydenberg added that for the “very few” PKA members who did encounter problems transferring their pension pot, “we must improve how we explain the options for moving their plan”.

The four pension funds under PKA are the State Registered Nurses’ and Medical Secretaries’ Pension Fund (Pensionskassen for Sygeplejersker og Lægesekretærer); the Health Care Professionals’ Pension Fund (Pensionskassen for Sundhedsfaglige); the Social Workers’, Social Pedagogues’ and Office Staff Pension Fund (Pensionskassen for Socialrådgivere, Socialpædagoger og Kontorpersonaler); and the Pharmaconomists’ Pension Fund (Pensionskassen for Farmakonomer).

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