March 10, 2017 / 3:50 PM / 6 months ago

Danish pension providers in push-back on added regulation

COPENHAGEN, March 10 (Reuters) - Danish pension firms are lobbying against a regulator’s proposal that would force them to give customers detailed forecasts on future payout and risk, offering instead to set standards themselves, the Danish Insurance Association said on Friday.

With a sharp fall in interest rates in recent years, customers have moved from defined-benefit plans that invest in bonds, and with payouts agreed in advance, to defined contributions invested in more volatile assets such as stocks.

As a result, Denmark’s financial regulator (FSA) now wants firms to better inform each pension saver about how much future payouts could deviate due to risks arising from exposure to the stock market and other investments.

If approved by parliament, the detailed statements could become mandatory from 2018. But the industry argued that added public regulations amount to unnecessary red tape, and that it can handle the matter itself.

“It’s bad timing if parliament and the FSA soon introduce more regulation on the sector. We have voluntarily come up with suggestions which would be much better”, Chief Executive Allan Polack of pension firm PFA, with assets of 450 billion Danish crowns ($64.23 billion), told Reuters.

Top banks Nordea and Danske Bank also oppose the added regulation, the insurance lobby group said.

The regulator however said the topic was too important to allow the industry to decide which information it should give, and that transparency was needed.

“With the increasing use of market rate products it is no longer the funds that take the loss if return on investments turns out lower than expected, but the pension savers,” FSA chief Jesper Berg said.

In case of a significant drop in asset values, this could in turn have implications for state finances and also lead to pressure on governments to cover losses, he told Reuters.

Chief Executive Christian Hyldahl of top pension fund ATP, which has assets of 759 billion crowns, said the move away from bonds would continue.

“We need to run a bigger risk by investing more in alternative projects, if we shall be able to deliver a substantial return to Danes, who are going to live ever longer,” he said.

Denmark’s minority government, which has struggled to impose its will on parliament, welcomed a debate.

“It’s too early to discuss possible new initiatives, before we have been through a profound and thorough debate among all participants. That debate has just started”, Brian Mikkelsen, the cabinet minister in charge of financial regulation, told Reuters. ($1 = 7.0058 Danish crowns) (Editing by Terje Solsvik)

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