DENMARK – PFA Pension may go head-to-head with the financial regulator over an official order to stop it using collective bonus provisions to fund commercial discounts.

The Danish Financial Supervisory Authority (FSA), or Finanstilsynet, ordered PFA to stop putting collective special bonus provisions on an equal footing with shareholders' equity when it comes to covering the commercial discounts it gave existing and new customers.

But the pensions provider said: "PFA does not agree with the FSA about this sanction and is considering an appeal."

In a statement, the FSA said that, based on the information available, it judged that, by having financed discounts to selected customers using funds from collective special bonus provisions, PFA Pension had acted illegally.

It had acted contrary to the requirement of fairness in section 21 of the Financial Business Act, the FSA said.

"The requirement of fairness applies in any situation where collective special bonus provisions apply discretion to selected clients," it said.

The FSA said it was therefore requiring PFA Pension to stop granting discretionary rebates funded by collective special bonus provisions.

PFA will also have to return the funds used so far from the collective special bonus provisions to fund rebates.

Henrik Heideby, PFA's group chief executive and president, said: "The ruling is based on a misunderstanding of the factual and legal conditions."

He said PFA's focus was on creating value for all customers and contributing to competition in the market for the benefit of the consumers, who would then benefit from the low prices.

The provider said that, in this way, its business model – a strategy of creating maximum value for the customers – was a competitive factor in the market for the benefit of society and the consumers.

"It is important for me to point out that no customers have been deprived of any value, and PFA's competitiveness is a benefit to all customers," Heideby said.

"The corporate pension plans are put out for tenders to improve the financial advantages for the employees.

"The commercial market is driven by economies of scale, which means the expenses for each unit will decrease for the benefit of all customers as the pension supplier grows."

He also said PFA did not fix the price of pension plans on a discretionary basis and to selected customers.

All customers are assessed on the basis of expected profitability, and this is the basis on which PFA has increased the financial return to the customers, he said.

"It is the market that fixes the price, and it is purely from a computational point of view that the FSA refers to a discount," Heideby said.

PFA said it was now considering how the enforcement order should be implemented, and whether it would lodge an appeal to the Ministry of Business and Industry's Commercial Appeal Board.

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