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Proposal would send Denmark's 'forgotten' pension funds to ATP

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  • Proposal would send Denmark's 'forgotten' pension funds to ATP

DENMARK - ATP could see more business coming its way if a proposal to transfer "forgotten" funds held in dormant Danish pensions accounts to the country's largest pension fund comes to fruition.

Although the total amount of money is likely to be relatively small, PensionDanmark said it supported the proposal - a move it said would cut costs and give individuals a clearer overview of their retirement income.

In a statement, DKK88bn (€12bn) labour-market pension fund said: "It makes good economic sense to gather pension savings together. It provides a better overview, and you only pay administrative costs in one place."

Torben Möger Pedersen, managing director at PensionDanmark, said: "It would be particularly useful for employees who change jobs often and have many periods without work, who at the moment have their labour-market pension spread across many different schemes."

He said the transfers could be useful for accounts that had been open for less than two years, with only around DKK25,000 in them.

Industry association Forsikring og Pension calculates the total amount held in small pension deposits in Denmark - of less than DKK50,000 - to be DKK20bn, including both active and dormant accounts.

According to Möger Pedersen, ATP, being the overarching labour market supplementary fund, would be a good home for these miscellaneous pensions because it follows the employee for the whole of his working life.

This would prevent many unnecessary costs, he said.

Lars Rohde, chief executive at ATP, said whether the move eventually happened was a political matter, but added that it would lower costs in the pension system.

"If we could reduce the number of accounts, it would be good in that way," he said.

There would be various legal and logistical hurdles to overcome, however.

"ATP is a flat-rate mandatory scheme, so there would need to be a change in the ATP law," Rohde said.

"Secondly, ATP is a guaranteed insurance product and not an account - once we had received contributions and built up the pension right, we are not in a position to pay out."

He added that the traditional ATP model might not be suitable for this purpose.

Rohde said it was difficult to judge the proposal, as there were still no actual figures of the sums involved, nor the number of accounts or insurance policies that may be considered "forgotten".

Many pension plans are intentionally left dormant, he pointed out.

Rohde also pointed out that consensus within the industry would be an important factor if such a move were to happen.

"It should definitely be acceptable on a broad industry basis - otherwise, it will not work at all," he said.

PensionDanmark has around 600,000 members. While it sees around 40,000 new members each year - joining as a result of new employment in the sector covered by collective agreements with PensionDanmark - another 40,000 cease contributions because they take a new job in a different sector, the fund said.

Möger Pedersen said: "We advise new members to transfer their old pension savings to us. We recommend members who stop contributing to transfer their savings with us to their new pension scheme."

But many do not take advantage of the opportunity to transfer, he said.

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