Norwegian financial group Storebrand is taking new action in its bid to win municipal pensions business from the dominant provider KLP, lodging a complaint with the EFTA supervisor relating to the reluctance by many local authorities to put their schemes out to tender.
Storebrand announced it has asked the supervisory body of the European Free Trade Association (EFTA) to clarify that there is an obligation to tender when procuring occupational pensions for municipalities and state health organisations.
Odd Arild Grefstad, chief executive officer of Storebrand, said: “ESA [EFTA Surveillance Authority] can clarify what correct tendering practice is for occupational pensions.”
In the statement released last week, the Lysaker-headquartered financial group said municipalities in Norway purchased services for almost NOK60bn (€5.8bn) of occupational pensions each year.
“It is right and sensible that the municipalities’ largest purchases are made by tender, like all other purchases. Yet this does not happen,” said Storebrand, which re-entered the municipal pensions market in the last few years, becoming the only large provider to compete against KLP, which had a near-monopoly in the sector.
Grefstad said his group now felt the municipalities were uncertain about correct tendering practice, and that it would be an advantage to remove that uncertainty.
“Such a clarification will ensure a well-functioning market, make life easier for the municipalities and can save them large sums,” he said.
Storebrand said local authorities should not put pension schemes out to tender just because they had to, however, saying they should also be aware that much money could be saved by making an assessment about changing pension providers.
“It is also important to know that the employees’ pension is determined in the collective agreement, and they therefore receive the same pension regardless of which supplier the municipality chooses,” the company said.
Meanwhile, Jon Hippe, head of the public sector at Storebrand, said municipalities that had carried out tenders in recent years had chosen to change suppliers and saved a lot of money.
“One example is Øygarden, which saves NOK70m each year during the agreement period,” he said.
“This is a lot of money for a municipal budget, and can come in extra handy in the demanding times we are in,” he said.
Storebrand said it was also asking ESA to consider the practice that locked municipalities into KLP because their earned equity was not taken with them when moving.
It said this practice was an advantage for a private financial group such as KLP – one that it believed amounted to illegal state aid since it was community funds that were being made available to the company on more favourable terms than would be achieved by other market players.
“A solution to this problem is an advantage for both municipalities and healthcare companies – they would take their entire equity with them when they move, including the accrued equity,” said Grefstad.
In response, Sverre Thornes, CEO of KLP, told IPE: “We have not seen Storebrand’s complaints about Norway to ESA, but parts of it have been referred to in the media. This may possibly be a matter between ESA and Norway.”
On a general basis, he said, KLP could say it adhered to the laws and regulations that applied to the business it ran.
“It is the municipalities who decide when to go out for tender,” the KLP CEO said.
“In the tender rounds that have been held, we have worked hard to deliver the best offer,” said Thornes, adding that his company would continue doing that in future procurement processes.
“We will wait for ESA’s treatment and will be happy to help shed light on the matter if ESA or the state contacts us,” he said.
ESA’s function is to monitor compliance with European Economic Area rules in Iceland, Liechtenstein and Norway, enabling them to participate in the European internal market.
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