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.
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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.
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By GlobalData“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.
