The Danish Parliament implemented IORP II through new legislation on company IORPs (‘lov om firmapensionskasser’, or Company Pension Funds Act) shortly before Christmas 2018.
The vast majority of pension schemes in Denmark established as part of the employment relationship are administered by life insurance companies. As such, they are regulated by the Solvency II Directive, rather than IORP II. Company IORPs governed by IORP II account for less than 2% of the Danish pension market. Implementation of the new Company Pension Funds Act has therefore not attracted much attention in Denmark.
The first IORP directive was implemented into Danish law through Company Pension Funds Act 2003, and several of its provisions are maintained in the new legislation, including the rules on annual reporting, audit and inspection.
Other provisions in the Company Pension Funds Act, such as the requirement for a remuneration policy, are new. While their potential impact is not yet fully known, the legislature is keen to ensure that the changes do not have a disproportionate impact on IORPs.
Since 2000, all members of Danish IORPs have had access to information on their various IORPs through a central dashboard: www.pensionsinfo.dk. Some of the information requirements were originally introduced as part of Denmark’s implementation of the Portability Directive, and have now been re-enacted in the new Company Pension Funds Act.
Governance for both pension companies and financial institutions has been a popular subject in recent years. As a result, Danish pension companies already largely comply with the new IORP II governance standards, and further major changes for IORP II are not anticipated. The general rules on corporate governance in financial institutions will be maintained to ensure an effective risk management system, and the current executive order on the management and control of IORPs will be amended to implement the new IORP II provisions on employees in key functions.
As part of the ‘fit and proper’ person test, all members of an executive board or board of directors must, on taking office, file an application with the Danish Financial Supervisory Authority. This will need to include certain personal information, such as details of their qualifications and standing. Any person employed in a key function must also follow this procedure.
Board or executive committee members, and other employees whose activities have a material impact on the risk profile of the IORP, will be covered by the new remuneration policy. Further details, including an explanation as to which ‘other employees’ are in scope for this purpose, are awaited from the Danish Ministry of Industry, Business and Financial Affairs.
IORPs were already required to make investments with ESG considerations in mind. But it is expected that the new ESG requirements will lead to an increased focus on IORPs’ investment policies.
As yet, no new processes for obtaining consent from members have been introduced in relation to cross-border transfers of IORPs.