The three Danish professional pension funds run by pensions manager Unipension saw costs surge by up to 43% last year because of their upcoming split as the smaller two prepare to shift their operations to rival provider Sampension.
In their 2015 annual reports, the Architects’ Pension Fund (AP), the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) and the Danish Pension Fund for MAs, MScs and PhDs (MP Pension) said pre-tax returns for the year fell to 5.1%, 4.7% and 4.4%, respectively, from 10.2%, 10.5% and 10.2% the year before.
But their active investment management generated returns above the reference indices, the pension funds said.
Egon Kristensen, chairman at MP Pension – largest of the three schemes – said: “The pension fund produced a competitive return for members once more in 2015.”
MP Pension’s business model was to build up a large capital buffer, enabling it to put a long-term investment strategy in place in spite of turbulence on the financial markets.
Its solvency coverage increased to 1.26% at the end of 2015 from 1.08% a year before, according to the annual data.
Meanwhile, AP’s solvency coverage grew to 1.4% from 1.2%, and PJD’s coverage rose to 1.61% from 1.35%.
Each of the three pension funds, however, saw its total assets fall during the year and costs increase.
In December, Unipension, set up by the three professional pension funds to manage their assets and administration collectively, announced that AP and PJD decided to quit the alliance and move their funds to Sampension.
Commenting on the upcoming move, AP chairman Mette Carsted said in the annual report: “In Sampension, we can look forward to becoming part of an even larger joint company, with the economies of scale that will yield.”
In 2015, MP Pension saw total assets fall to DKK112bn from DKK117bn.
It is set to continue alone at Unipension from 1 January 2017, when AP and PJD will leave.
AP reported that total assets fell to DKK9.2bn at the end of 2015 from DKK9.6bn, while PJD said total assets fell to DKK14.1bn from DKK14.7bn.
Costs at MP Pension rose 1.7% in 2015 to DKK529 per member, but the two funds leaving Unipension saw much steeper rises in costs, with AP’s costs climbing 43% to DKK1,263 per member and PJD’s costs up 32% to DKK1,319.
All three pension funds put the rise in costs down to extraordinary costs as a result of the termination of the cooperation at Unipension.