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November 24, 2011updated 08 Jun 2022 9:09am

Danish pensions giant storms into UK market

The objective of NOW: Pensions is to target employers who opt for the default fund, the National Employment Savings Trust (NEST), which has been established by the government as an alternative for employers not wishing to appoint a fund management company.

By LII editorial

Causing more than a slight stir in the UK’s asset management space, Danish pension scheme giant Arbejdsmarkedets Tillaegspension Group (ATP) has entered the UK pensions market ahead of next year’s launch of compulsory work place pension scheme auto-enrolment.

ATP’s entry into the UK comes by way of the establishment of an independent multi-employer trust, NOW: Pensions.

The objective of NOW: Pensions is to target employers who opt for the default fund, the National Employment Savings Trust (NEST), which has been established by the government as an alternative for employers not wishing to appoint a fund management company.

NOW: Pensions CEO Morten Nilsson said: “Our experience and research shows that for most members, choice is a burden. And the fact is, where there is choice, 95% end up in the default fund – so why not simply give people a full service and relieve them of this burden?”

Nilsson continued: “We believe that by leveraging ATP’s unique experience in running a similar scheme [to its Danish scheme] and its strong investment capabilities, NOW: Pensions is well placed to offer a better deal to UK employees.”

And a better deal it certainly appears to be. A significant attraction of the NOW: Pensions alternative is low costs: a monthly administration fee of £1.50 ($2.40) per member and a 0.3% annual product investment management fee. By comparison, annual management fees in the UK generally run in the 1.25% to 1.5% range.

“Our investment strategy has been refined over 45 years’ experience,” said Nilsson. “Core to our belief is keeping it simple and transparent for members, which will also reduce the need for advice and give better outcomes and keep costs down.”

According to ATP, its lower fees could easily result in the final amount of pension savings accumulated by an employee being 30% more than in a scheme charging the more common level of fees.

For its launch of NOW: Pensions, ATP has attracted four high-profile professionals to act as trustee directors from the beginning of 2012. They are:

  • Imelda Walsh, former group human resource director of UK retailer Sainsbury’s;
  • John Monks, member of House of Lords and former general secretary of the Edinburgh Trades Union Council and the national Trade Union Council;
  • Christopher Daykin, former government actuary; and
  • Nigel Waterson, former shadow pensions minister.

ATP Group CEO Lars Rohde will serve as the fifth trustee director.

Leaving no doubt that NOW: Pensions will not be confining itself solely to competing with NEST, Daykin noted: “I am excited by the opportunity to help bring to the UK auto-enrolment market a customer-friendly and responsive trust-based alternative to NEST and to contract-based offerings.”

He added: “I am convinced that NOW: Pensions can become a major player in the UK individual account market, and look forward to being a part of that success.”

ATP was established in Denmark in 1964 as an independent entity to operate the country’s compulsory, supplementary pension scheme. Under the scheme, contributions are mandatory for all workers between the ages of 16 and 67 and are split with two-thirds paid by the employer and one-third by the employee. The ATP Scheme is the largest pension scheme in Denmark and covers almost the entire Danish population representing 4.6m members and 160,000 employers.

In addition to the ATP Scheme, the ATP Group administers a number of pension and social insurance schemes, including several for the Danish state. At the end of June 2011, the ATP Group reported total assets of DKK469bn ($90bn) and reserves of DKK78bn.

On ATP’s investment capabilities, Walsh observed: “ATP’s track record in Denmark of delivering good investment returns at low costs is impressive.”

Indicatively, over the past 10 years ATP has delivered an average annual return on investment of 7.4%, some two percentage points better than the average of other pension providers in Denmark. Investment management of NOW: Pensions’ assets will be undertaken by NOW: Pensions Investments, a subsidiary of ATP in Denmark.

Auto-enrolment is due to commence in the UK in October 2012. It will involve a gradual phasing-in process, starting with companies with more than 120,000 employees, followed by companies with between 50,000 and 119,999 employees in November 2012.

By October 2013 all companies with more than 800 employees will have had to comply, with the final deadline for all employers to comply set at September 2016.

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